Financial Analysis In comparing The Hershey Company with one of its closest competitor, Nestlé, we find that The Hershey Company is financially healthier and stronger. Table 1 shows some financial ratios of both companies. In analyzing both the current and quick ratios, Hershey’s ratios are higher; therefore the company has more capability to pay off its financial obligations. The debt-to-equity ratio is also higher for The Hershey Company; this is good news for its shareholders because the greater earnings are shared among the same amount of shareholders. However, the company must be careful because a too big of a ratio can eventually lead to bankruptcy (Investopedia).
. (#8 Form B) New financing Answer: a Diff: M Old debt ratio = 0.3333; New debt ratio = 0.1667. = 7.5. TA = = $100,000. Debt = 0.3333($100,000) = $33,330.
The shareowner’s deficit has decreased over the year substantially. This is very good news for shareholders because they do not want to be in a deficit but in a surplus so that they can being receiving dividend payouts. Concerns that investors and creditors may have just by looking at this statement are that it only shows one year of information. They may require more information to see a real trend over a period of time. Although from 2003 to 2004 was a positive year, before that there could have been negative trends.
From the ratio analysis of Tire City, we can see that the company’s financial health is favorable increasing as of 1995. Tire City has a 23.8% ROE, in which it is very consistent throughout its previous years and is above average. Tire Company is very profitable; the profit margin improved from 4.90% to 5.06% in 1995. This growth is due because of the decrease in percentage sales on the cost of goods sold. Also, this increase can be attributed to the competition in the market.
I do like the fact that from year 2009 to 2010 their liabilities dropped by $1,208,000 and their current assets went up by $936,000. Their tangible assets are very interesting because they were up by $1,775,000 from 2009 to 2011. A balance sheet can be applied to everyday life by allowing a person to get a quick handle on the financial strengths and capabilities of their lives. If someone keeps a balance sheet they are able see what steps they need to take to better their financial position. The balance sheet will allow you to see if you are overspending on necessities versus impulse buying.
Management believes rapid inventory turnover, when combined with the operating efficiencies achieved by volume purchasing, efficient distribution, and reduced handling, enabled Costco to operate profitability at significantly lower gross margins than its competitors. A) Discuss how each component impacts profit generation. Selling high amount of merchandise at a very low cost leads to rapid inventory turnover. At some cases, Costco sold products before it had to pay many of its merchandise vendors. Even when vendor payments were made in time to take advantage of early payment discounts.
Walgreen’s operates their inventory on a last- in, first- out method to measure their inventory and costs of goods sold. This is a conservative accounting choice for management during the current period of rising prices. Even though we are not experiencing as drastic of price increases as in the past because of the economic environment, LIFO will portray a more conservative gross income and balance sheet. It is also beneficial for tax purposes because of the increase of cost of goods sold. As a result of the increase of cost of goods sold, income before taxes declines and Walgreen’s pays less income tax than if they were to use the first-in, first-out method.
Dividing the present value of future cash flows by the cost of the investment indicates that every dollar invested buys securities worth $1.18. Value is created. Table 1 The appropriate intrinsic value of PacifiCorp Assume: 1. 10-year investment horizon, when you liquidate at “book” or accumulated investment value 2. initial investment is $9.4 billion 3. no dividends are paid, all cash flows are reinvested 4. return on equity = 7.45% 5. cost of equity = 5.72% Year 0 1 2 3 4 5 6 7 8 9 10 Investment or Book Equity Value 9.4 10.1 10.9 11.7 12.5 13.5 14.5 15.5 16.7 17.9 19.3 Market Value (or Intrinsic Value) = Present value @ 5.72% of 19.3 = $11.07 Market/Book = $11.07/9.4 = $1.18 Value created: $1.00 invested becomes $1.18 in market value. Discounted Cash Flow Appendix 1 shows the discounted cash flow for following 15 years.
ACCT 3001 Job Order Costing The December 31, 2009, balance sheet of Danko Corp. is presented below: Danko Corp. Balance sheet December 31, 2009 Cash $12,000 Accounts Payable $5,000 Building & Equip. 20,000 Common Stock 10,000 Accum. Deprec. (4,000) Retained Earnings 13,000 $28,000 $28,000 During 2010, the following events occurred: 1. Danko purchased, on account, raw materials for $1,600, and used $1,300 in production.
Costco is doing great job in making sure that revenues constantly grow as shown below while maintaining a proportional amount of expenses to keep the profits the same or a little high from the previous year. Keeping these numbers high during a recessionary period is a very impressive feat by the management of Costco. One number to point out is that 2009 was a down year for Costco, all of the above ratios were lower than in 2008, but they bounced back in 2010 and in 2011. The 2009 year is merely an Outlier in Costco’s financial analysis because of the recession which was at a high in 2009. As the economy bounced back, so did Costco and its bottom line.