There are three ways of working out how profitable a business really is: * Gross profit percentage – This calculation shows gross profit as a percentage of the turnover. Gross profit percentage is also sometimes called gross profit margin. The calculation shows how well the business is managing its purchases of stock. A high gross profit percentage shows the business is doing well as it is controlling the cost of its purchases. * Net profit percentage – This calculation takes the idea of profitability one stage further by actually considering the profit as a percentage of turnover after all the other expenses have been taken out.
The shareholders have a vested interest in the implied value of PacifiCorp because it is an indication of the return on investment the shareholders can expect. When looking at Exhibit 10 in the case, it gives the shareholders insight into the enterprise value as a multiple of REV, EBIT, EBITDA and Net Income. The range of these possible implied values $6.252 billion to $9.076 Billion. It also gives the Market Value as a multiple of Earnings per Share and Book Value. That range is $4.277 billion to $5.904 billion.
What is more, a company may choose to pay dividend as the consideration for their investment, because high dividend payout is important for investors as dividends provide certainty about the company's financial well-being. Dividends are also attractive for investors looking to secure current income. In addition, some analysts indicate that how the decrease and increase of a dividend distributions from Champion can affect the price of its security. Companies like Champion that have a long-standing history of stable dividend payouts would be negatively affected by lowering or omitting dividend distributions. So it would be positively affected by increasing dividend payouts or making additional payouts of the same dividends.
d) minimize operational costs and maximize ﬁrm eﬃciency. e) maintain steady growth in both sales and net earnings. 4. Accounting concepts for a ﬁrm to create value it must: a) have a greater cash inﬂow from its stockholders than its outﬂow to them. b) create more cash ﬂow than it uses.
If a lot of debt is used to finance increased operations then it will incur a high debt to equity ratio, the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt interest cost, then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing. The debt/equity ratio also depends on the industry in which the company operates and Smithon Widgets being a manufacturing company the debt equity ratio is normally high.
The income statement is important because it will show whether the company’s revenue exceeded expenses for a specific period resulting in net income or the amount the company may have lost because the expenses exceeded the revenue. The retained earnings statement is equally important because it will indicate the exact reason why the company’s retained earnings increased or decreased over the reporting period. The balance sheet is important because it is the overview of the company’s financial condition at the time of the reporting period and the statement of cash flow’s is important because “Reporting the sources, uses, and change in cash is useful because investors,creditors, and others want to know what is happening to a company’s most liquid resource.” (Weygandt,
The goal of a financial manager is to: A) Maximize sales B) Maximize profits C) Maximize the value of the shareholders D) Maximize the value of the firm with both bond and stock holders Answer: C ( Many of you chose D) This is because shareholders are the owners and managers are hired by them. 6. Which of the following is the function of a financial market A) provide liquidity B) risk management C) efficient allocation of money D) provide information. E) all of the above Answer: E 7. One common reason for partnerships to convert to a corporate form of organization is that the partnership: A) faces rapidly growing marketing requirements.
The DFA also believes to purse high net worth individuals that would increase its total management assets so as to generate more profits through registered investment advisors (RIAs), showing significant assets growth over time in Exhibit 2. Besides, the Exhibit 5 shows that DFA’s fees are lower than those of most actively managed funds but higher than those of pure index funds. Therefore, DFA operating passive funds would provide its competitive position in the market and improve investor’s wealth in the current and future time. * Justify whether DFA people believes in efficient market According to efficient market hypothesis, the stock price should reflect all relevant information, which means the stock should be fairly priced regardless of any feasible analysis. However, in fact, the DFA people do not believe market is efficient because their core principles indicate profit depends on value of academic research and ability of skilled trader.
This is just one of many statements that investors will look at when looking into a company whether it is because they want to invest or are shareholders. Information from the income statement shows the users the activity of the company. The gross profits and the expenses are also important because of the profit. Expenses give the net income or (net loss) for the accounting period in question. These are important to the investors who are looking at the company but also to managers.
Wise stock investing can be a tricky way to save for retirement because of the way stocks rise and fall. People that are not very knowledgeable about stocks can rely on experienced companies, like T. Rowe Price, to help guide them in a proper direction. Another strategy is taking full advantage of the 401k program if it is available. This is accomplished by maximizing the contributions made, especially if the employer matches 100%. As a final point, tapping into assets such as a home can bring extra income for a comfortable