4. Which of the following includes operating income in the ratio’s numerator? A. Times interest earned B. Debt-to-equity ratio C. Acid-test ratio D. Gross margin percentage Use the following information for the next 2 questions. Tedi Co. had net sales of $1,000,000; inventory of $230,000; cost of goods sold of $700,000; average accounts receivable of $25,000; and average total assets of $750,000.
Analysis-Beta Corporation 1. Sources of cash-Amount received from customers, Issuance of common stock(1991) Uses of cash-Amount paid to suppliers, Investments in capital(1991) 2. Difference between net income and cash-Difference between account receivables and payables ,high value of depreciation 3. Cash flow from operations- | 1991 | 1990 | 1989 | Cash flow from operations | 3919 | 7000 | 3670 | Capital expenditures | 6031 | 4600 | 3650 | | No | Yes | Yes | 4. No dividend payments | 1991 | 1990 | 1989 | Cash flow from operations | 3919 | 7000 | 3670 | Capital expenditures | 6031 | 4600 | 3650 | | No | Yes | Yes | 5.
A: 40,500/10=4050 B: 33,600/9=3733 C: 36,000/8=4500 D: 19,000/7=2714 E: 23,500/6=3916 Total Straight-line depreciation = $18,913 Total Cost = $152,600 Depreciation Rate = 18,913/152,600 = 12.4% (b) Prepare the adjusting entry necessary at the end of the year to record depreciation for the year. Depreciation – Plant Assets 18,913
Week 10 Problems 1. Given the following information: Total assets $100,000 Debt (12% interest rate) $80,000 Equity $20,000 Variable costs of production $14 per unit Fixed cost of production $27,000 Units Sold 12,300 Sales price $19.75 per unit What happens to operating income and net income if output is increased by 10 percent? Verify your answer. Revenue: $19.75*(12,300) = $242,925 Expenses: $14*(12,300) = $172,200 Operating Income: $242,925-$172,200 = $70,725 Net Income: $72,725- (.12*$80,000) = $63,125 With 10% increase in revenue: Revenue: $19.75*(13,530) = $267,217.50 Expenses: $14*(13,530) = $189,420 Operating Income: $267,217.50- $189,420 =$77,797.50 Net Income: $77,797.50 - (.12*$80,000) =$38,197.50 Operating Income rose from $70,725 to $77,797.50 for a 91% increase. Net income dropped from $63,125 to $38,197.50 which cuts losses by $24,927.50.
APV vs. WACC Problem Given the following information, answer questions 1 and 2 below. Company and market data: Rf = 4% Rm = 10% βu = 0.9 D/V (target) = 40% RD = 4% Tc = 30% Project CFs: I0 = 1000, CF1 = 300, CF2 = 400, CF3 = 500 1) Calculate the project’s value using WACC 2) Calculate the project’s value using APV -Oops, we can’t until we know the financing (debt) pattern over time. (a) OK, assume the project is financed with 60% debt which is paid off in three equal, annual installments. (b) Now assume instead of (a) that the debt is rebalanced to be consistent with the firm’s target debt ratio (i.e. D/V = 40%).
Show clearly the steps to arrive at the following estimates in Exhibit 10: Enterprise Value as Multiple of: Revenue EBIT EBITDA Net Income 6,252 8,775 9,023 7,596 6,584 9,289 9,076 7,553 MV Equity as Multiple of: EPS Book Value 4,277 5,904 4,308 5,678 Median Mean If you need to use a discount rate to discount cash flows then an appropriate discount rate estimate for PacifiCorp is approximately 9%. 3. Bid assessment: How do you assess the bid for PacifiCorp by Berkshire Hathaway? How much does Buffett pay for PacifiCorp for its equity and as a whole? How do these values compare with the firm’s intrinsic values estimated above?
=2.02 = 1.36 Acid-Test / Quick Ratio Quick Ratio = ! "##$%& ! "#$"%"&"'( Quick Assets = Total Current Assets – Inventories – Prepaid Expenses BOSCH INDIA LIMITED Quick Assets = 4236.30 – 1183.06 – 0 = 3053.24 3053.24 Quick Ratio = 2095.40 Quick Ratio = 1.45 FEDERAL MOGUL GOETZE LIMITED Quick Assets = 372.58 – 139.20 - 0 = 233.38 233.38 Quick Ratio = 227.71 Quick Ratio = 0.85 ! "#$% ! ""#$" Financial Ratio Analysis – Compiled By: Arpit Kapoor 1 Turnover Ratio Inventory Turnover Ratios !
Determine the balances in the following accounts as of March 31: | | | 1) Accounts Receivable | | $ 14,400 | | | | 2) Direct Materials | | $ 2,436 | | | | 3) Accounts Payable | | $ 1,177 | | | | | | | | | | | | | | | | 2 | | | | | | Centron | | | | | | a | | | | | | Units | | 20000 | 22500 | 25000 | | Direct materials $0.40 per unit | | 8000 | 9000 | 10000 | | Direct labor 1.80 per unit | | 36000 | 40500 | 45000 | | Variable factory overhead 2.20 per unit | 44000 | 49500 | 55000 | | Total Variable | | 88000 | 99000 | 110000 | | Supervision $24,000 | | 24000 | 24000 | 24000 |
Case 2.3 Take- Two Interactive Software, Inc. Question 1. Financial Ratios Formula Used 2000 1999 1998 Age of A/R (365/AR turnover) 91.71 115.87 183.42 Age on Inventory (365/Inventory Turnover) 63.5 57.2 57.9 Gross Profit % Gross profit / Net sales 36.00% 29.70% 24.00% Profit Margin % Net income / Net sales 6.50% 5.30% 3.70% Return on assets Net income / Ave. total assets 8.60% 9.90% 8.70% Return On Equity Net income / Ave. stockholder's equity 18.3% 27.1% 30.20% Current Ratio Current assets /Current liabilities 1.41 1.28 1.3 Debt on equity ratio Total liabilities / Total stockholder's equity 0.88 1.72 2.08 Quality of Earnings Ratio Net operating cash flows / Net income -2.21 -1.03 -1.12% A/R Turnover (Net sales / Avg. AR) 3.98 3.15 1.99 Inventory Turnover (COGS / average inventory) 5.75 6.38 6.3 Red Flag 1: The major “Red Flags” would be the quality of earnings ratio. In this case, the quality of earnings for 2000 is -2.21, for 1999 is -1.03, for 1998 is -1.12 which is very low for an investment point of view.
Question 11 - #93542 A T-bill with a face value of $100,000 and 140 days until maturity is selling for $98,000. What is the effective annual yield (EAY)? A) 2.04%. B) 5.41%. C) 5.14%.