The computation of ratios facilitates the comparison of firms which differ in size. Ratios can be used to compare a firm's financial performance with industry averages. In addition, ratios can be used in a form of trend analysis to identify areas where performance has improved or deteriorated over time. Because Ratio Analysis is based upon Accounting information, its effectiveness is limited by the distortions which arise in financial statements due to such things as Historical Cost Accounting and inflation. Therefore, Ratio Analysis should only be used as a first step in financial analysis, to obtain a quick indication of a firm's performance and to identify areas which need to be investigated further Profitability.
Define the three rules of time travel and discuss why they are important. How can you use them to compare and combine cash flows? Financial decisions often require comparing or combining cash flows that occur at different points in time. Rule 1: Comparing and Combining Values: The first rule is that it is only possible to compare and combine values at the same point in time. To compare and combine cash flows that occur at different points in time, we need to convert the cash flows into the same units or move them to the same point in time.
• $38,720 • $39,720 • $31,060 • $25,000 3. When calculating the weighted average cost of capital, which of the following has to be adjusted for taxes? • Debt • Preferred stock • Retained earnings • Common stock To download the complete answer check FIN 370 Final Exam 4. Buying and selling in more than one market to make a riskless profit is called: • profit maximization. • globalization • arbitrage.
In order to give the advices on how the purchase of PacifiCorp affects the value of shares in Berkshire Hathaway, I will analyze some critical issues related to this case. Intrinsic Value The return on equity and the cost of equity must be determined to calculate the appropriate intrinsic value of PacifiCorp. Table 1 shows the appropriate intrinsic value of PacifiCorp. I assume the initial investment of $9.4 billion is discounted for the 10 year time horizon. During 10 years, the investors will reinvest all the cash flows into the company, so maintaining the growth of 7.45% each year.
If not, how do they differ? No, Valentin is not correct. Liquidity is the ability for a company to be able to pay its obligations once they have matured and are able to meet unexpected needs for cash. A Solvency is the ability for a company to last as a whole. BE10-1 Kananga Company has these obligations at December 31: (a) a note payable for $100,000 due in 2 years – Yes, this is a long term liability.
Velocity is a measure of how often money “turns over” in a period. It is equal to nominal GDP divided by the nominal money supply. The quantity theory of money assumes that velocity is constant, which implies that real money demand is proportional to real income and is unaffected by the real interest rate. 7. Equilibrium in the asset market is described by the condition that real money supply equals real money demand because when supply equals demand for money, demand must also equal supply for nonmonetary assets.
The cost of additions and substantial improvements to property, plant and equipment is capitalized (www.at&t.com). The cost of maintenance and repairs of property, plant and equipment is charged to operating expenses (www.at&t.com). Property, plant and equipment is depreciated using straight-line methods over their estimated economic lives (www.at&t.com). Goodwill represents the excess of consideration paid over the fair value of net assets acquired in business combinations (at&t.com). Goodwill and other indefinite-lived intangible assets are not amortized but are tested at least annually for impairment (www.at&t.com).
The year-to-date’s net cash provided by operations is $4,717.37 3. The cash balance at the end of period for the current month is $32,060.92 4. The beginning Retained Earnings balance is $189,037.60 5. The ending Retained Earnings balance is $214,102.64 The statement of cash flows information is important to users because what it shows is where the cash came from, what the cash is used for and the overall changes within the cash for the accounting
WACC takes into account all capital resources such as common stock, preffered stock, bonds and any other long-term debt. Usually a company’s assets are financed by either debt or equity. By taking a weighted average we can find out how much interest a company has to pay for every dollar it finances. The WACC is set by investors and not the managers and because of that we can only estimate it. 2.
Recording of cash or check going in or out of an account occurs not when an expense or revenue takes place. Differences in Accounts Accrual basis accounting tracks transactions involving income and expenses. Financial activity is more accurately recorded during a period with this method. This method requires more time to be spent on journalizing and entering transactions. This method allows collection of information that affects future financial decisions.