……………5 f. What types of stock does the company have? How many shares are there outstanding for each type of stock for the most recent year presented?.......................................................................5 g. Does the company use the single-step or multiple-step income statement or a variation?........5 h. Does the income statement contain any separately reported items in any year presented, included discontinued operations or extraordinary items? If it does, describe the even that caused the item. Hint: there should be a related footnote……………………………………………………..6 i. Describe the trend in net income over the years presented……………………………………………………6 j.
Book to market ratio was the most powerful scaled price variable for predicting stock returns (more than PE and A/ME). - Size effect exists. - High BE/ME ~ value stocks. Low BE/ME ~ growth stocks - growth were typically overhyped? that did not go well with efficient markets hypothesis.
– working capital 3. Current assets divided by current liabilities is known as the – current ratio 4. Danner Corporation reported net sales of $600,000, $680,000, and $800,000 in the years 2011, 2012, and 2013, respectively. If 2011 is the base year, what percentage do 2013 sales represent of the base? – 133 2013 net sales / base year 2011 net sales = 800,000 / 600,000 = 1.33 1.33 x 100% = 133% 5.
Ratios can tell if the business is using its assets appropriately, and if liabilities of the company are well-managed. It shows whether a business can invest in more capital, or if there is room for business growth. It shows whether a business will be able to pay off its debts or their short-term expenses or their daily expenses. It basically shows the strength and weaknesses of the business. It helps for forecasting on making certain financial decisions.
CCI would be taking a somewhat high risk by issuing additional stock due to the uncertainty about the offering price. Having a low P/E ratio with respect to the rest of the market, and the replacement cost of the firm being greater than its book value (argument 3), there is a good chance that the current stock price and the proposed offering Although long-term debt is a better financing choice a few of the drawbacks are pointed out. Debt holders claim profit before equity holders, so the chance that profits may be lower than expected, increases risk to equity may reduce or impede stock value. However, in extreme financial situations such as a recession period, CCI would still be able to increase its cash during a recession period with all debt capital structure. Also, there is a remaining 12.5 million that would have to be paid at the expiration of the bonds, but that could be paid off by issuing new bonds or additional equity at that time.
Case 2.3: Happiness Express, Inc. 1. The primary audit objectives used by auditors to accomplish by confirming a client’s year-end accounts receivable is stated in SAS No. 67, the Confirmation Process. The assertions used by this standard include existence or occurrence, completeness, and valuation. The existence assertion is to make sure that the client and accounts exist, the completeness is to make sure that all of the balances are recorded, and the valuation is to make sure that the balances are recorded at the correct amount.
Jones sustainable growth rate: g*=RT*ROA, so compare with actual sales growth, we can make the conclusion Jones well managed its growth through year of 2004 to 2007. As Jones doing low margin business, so should avoid high financial leverage ratio as interest burden will be heavy. First Quarter 2004 2005 2006 2007 Sales increase 18% 17% ROE 7.6% 13.6% 12.3% 2.0% Sustainable growth rate 7.6% 13.6% 12.3% 2.0% Profit Margin 0.9% 1.5% 1.34% 0.8% Assets turnover 2.76 2.88 2.86 0.70 financial leverage 3.20 3.12 3.23 3.49 Shareholder’s equity 31% 32% 31% 29% 2.Why had this profitable company had to borrow more and more from the bank in the past and why does it need a new bank loan? From above table we can find out Jones collection period increased step by step and this will need more cash support that, payables period exceed 10 days from 2006, this will lost 2% discount from suppliers. As Jones sales growth rate is high than sustainable rate, so its net earning could not support increased account receivable and inventory.
What is this firm’s free cash flow for the year? (2 points) Increase in NFA: $50 Increase in NWC: $20+$45=$65 FCF=NOPAT-increase in NFA-increase in NWC=$400-$50-$65=$285 (3) The four key elements of a good corporate strategy that has the potential to create substantial shareholder value are: (4 points) Good strategy must think more expansively about the right scope. Can typically distinguish the firm sharply from its competition. Match opportunities to capabilities and core competencies. Corporate focus (4) Describe how the four key elements of the Value Sphere interact to create value ( don’t just list the four elements—describe how they interact): (4 points) There are four elements of Value Sphere: Strategy, Resource acquisition & allocation, Performance metrics, People & organization culture.
ANS: True PTS: 1 REF: 2 NAT: AACSB Analytic | AACSB Strategy 5. T F Capital means the sum of money invested in the company, that is, stockholders' equity plus debt owed to creditors. ANS: True PTS: 1 REF: 2 NAT: AACSB Analytic | AACSB Strategy 6. T F A company is said to have a competitive advantage over its rivals when its profitability is greater than the average profitability for all firms in its industry. ANS: True PTS: 1 REF: 4 NAT: AACSB Analytic | AACSB Strategy 7.
The use of Ratios in Financial Analysis Dennis M. Pipho Sept. 23, 2014 Concordia St. Paul Cohort 2258 The use of Ratios in Financial Analysis The goal of any successful financial manager should be to maximize the value of the business for the shareholders or owners. (Droms & Wright, 2010). The way in which managers are able to determine the value of the company is through the use of financial statements. Although each financial statement focuses on a different area or length of time, the shared piece of information that in some way is depicted by every financial statement and the way the shareholder value is calculated is ultimately cash. Financial statements are simply the framework of a financial picture created over a given period of time.