If the cash is higher than the net income, the company’s net income is of high quality. If the cash is lower than the net income, the company’s net income is not turning into cash and a red flag should go up. Having more cash than the net income can mean shareholders will receive an increase in dividends can reduce debt, buy back stocks, or purchase another company. According to, the cash flow statement Home Depot, Incorporated is similar to fiscal year 2007. In fiscal year 2008, Home Depot Incorporated generated $5.5 billion of cash flow from operations and used $2.0 billion to repay short-term debt and other obligations plus $1.8 billion for capital expenditures and $1.5 billion in dividends.
Using product offered by Continental Bank would require a higher cost for J&L, and illiquid compared with NYMEX. However, they won’t need to post a margin at the beginning of the contract. The use of a monthly average price a net would be an advantage to J&L. 3. Using the estimate of 4.5 million gallons per month, how would you construct a futures hedge for the next 12 months?
With everything that has been reviewed, I would recommend that CSI lease vs buying right now. The financial returns for the lease option are that it has a higher annual payment and a lower after tax cash flow, but does free up some instant cash and relieves CSI from owner responsibilities on the building. Leasing will also let CSI build up capital to do the end of term buy option without having to have an additional 200,000 of working capital on hand for the bank and will reduce the need for a loan and credit mark. The second option is to
I would make an investment in the company’s 5% convertible bonds. Sepracor’s ROA and ROE is above the average and showing that it is profitable; however, the company’s debt to asset ratio is above 1, which means that most of its assets are financed through debt instead of equity. Sepracor would be in trouble if its creditors were to start demanding repayment. C.) To make valid comparisons between Sepracor and Bayer, you would have to compare the rules for fair value under the U.S GAAP and iGAAP. Under IFRS, convertible bonds are separately recorded as liabilities and stockholder’s equities.
2. I utilized an “Acid Test Ratio” which shows us whether the entity could pay all its current liabilities if they became due now or sooner than expected. In 2011, the acid test ratio was 0.64. By 2012, it decreased to 0.43. Even though the acid-test ratio is less than 1 which rates in the lower third quartile in the industry of 1.6, 0.9 to 0.6, it indicates a concern with repaying current liabilities.
| | | Establishes a market value for the firm. | | | Makes it easier for owner-managers to engage in profitable self-dealings. | 8 points Question 2 Financial Accounting Standards Board (FASB) Statement #13 requires that for an unqualified audit report, financial (or capital) leases must be included in the balance sheet by reporting the Answer | | residual value as a fixed asset. | | | residual value as a liability. | | | present value of future lease payments as an asset and also showing this same amount as an offsetting liability.
Although the bonds have the lowest cost of issuance among the choices, its Net Present Value (NPV) of $219 million is lower than the HUD 242. The Business Dictionary defines NPV as “the difference between the present value of the future cash flows from an investment and the amount of investment” (Business Dictionary, p. 1, 2012). The collateral requirement for the bonds is also much higher than the HUD 242. Because the collateral includes escrow on ECH’s gross receivables, ECH possibly may have less control over its future revenue stream. The simulator also took note of the four-year time frame of the expansion project versus the three-year spending limit on the bonds.
Since the Walton Work Wear line is in the production stage, its accumulated development costs should be capitalized. The Carroway Cool Top has not started it commercial production which would allow the development costs not to be amortized yet. Also interest costs on loans to generate financing for the R&D activates of a product can be capitalized rather than expensed. The capitalization of interest would allow CCL to reduce taxable income in the future when it is more profitable. I would recommend that CCL make the above changes immediately so that the financail statements are not incorrect.
Memorandum To: Kimi Ford From: xxxxx Date: 6 July, 2001 Subject: Nike’s cost of capital The firm’s cost of capital is the opportunity cost of an investment, which provides a benchmark of firm uses of capital against the capital market alternatives. It is important to estimate a firm’s cost of capital because there will be no economic value created for the investors if the firm earn below its cost of capital. In another word, cost of capital is the minimum required rate of return set by the investors. WACC, as a common practice of expressing a firm’s coast of capital, calculates the weighted average of the cost of individual sources of capital employed. My evaluation of Nike’s share price is based on Joanna Cohen’s analysis.
Ahold can better spread his risk. b) ING has a high equity beta and a low asset beta. They had to have a lower asset beta because they can’t get customers if they have a big risk to fail. A bank has to be reliable. Vraag 4 a) Debt beta measures the sensitivity of the return on debt to the returns of the market.