The ROE for Sepracor is 33.07%, which means that 33.07 cents of assets are created for each dollar that was originally invested. It measures how Sepracor is using its money. The higher the return on equity, the more funds available to be invested in improving business operations without having to invest more capital. Debt to asset ratio measures the company’s solvency, and the higher the ratio, the lower the borrowing capacity for the company. I would make an investment in the company’s 5% convertible bonds.
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.
* Of the $18400 Rhodes made in mortgage payments last year, $8000 was interest. The income statement lists 2008 interest paid as $32000, which means that there are other debts that required payments of $24000. If possible, accelerating payback on these loans can be very beneficial in the long run. * At industry average levels, wages of a similar business would be approximately $79000, or $11000 lower. * Wages, advertising and rent total %23.1 of sales in the average business, leaving %1.9 of sales for property taxes, interest, utilities, depreciation and other expenses.
. (TCO A) Which one of the following is an advantage of corporations relative to partnerships and sole proprietorships? (Points : 5) Reduced legal liability for investors Harder to transfer ownership Lower taxes Most common form of organization 2. (TCO A) The Dividends account _____. (Points : 5) is increased with a debit is decreased with a credit is not an expense account All of the above 3.
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.
In light of the direction our country is headed, taxes seem to be a priority and to some, a solution, to the debt problem we currently face. The estate and gift taxes are one way the government ‘quietly’ generates revenue. One justification is that estate taxes are less intrusive on a person’s day-to-day lifestyle, unlike increases in income taxes, which have a direct affect. In 1976, the government ‘unified’ the estate and gift tax, which generated a common formula. A positive side to these transfer taxes is that “it takes lifetime transfers into account to determine the tax on assets transferred at death” (Spilker, Ayers, Robinson, Outslay & Worsham, 2013, pg.
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
It will show where it comes from, and where it goes. This indicates the company’s profitability, as shown in the net income, and their ability to meet obligated debts. It is possible for a company to have success in sales and net earnings and still fail to generate enough cash flow to meet obligations. The Home Depot is reporting a well maintained cash balance as reported in the balance sheet, and its operations continue to keep the influx of cash coming. The Home Depot cash flow shows significant net earnings and the cash flow statement does not indicate a drastic drop from previous years.
d. Why did MSFT issue four papers instead of one? e. Do you expect that those notes will be called or redeemed? * MSFT is raising money through its 4 series of unsecured notes because it wants to use that money for its general corporate purposes, which may consist of funding of working capital, capital expenditures, repurchase of stocks and for acquisitions.1 * This paper is really cheap as the YTM expected from this paper for all the 4 issues is quite comparable to the respective T-Bill Yield rates. The YTM for each of the 4 issues are: YTM (2013) = 0.917% YTM (2015) = 1.701% YTM (2020) = 3.093% YTM (2040) = 4.566% * YTM is the rate of return estimated on a bond if it is held until the maturity date, while the coupon rate is the amount of interest paid per year, and is expressed as a percentage of the face value of the bond. In this case YTM differs from the coupon rate because the issued price is not the same as the Face value of the unsecured notes.
Financial ratios give you a method of putting numbers into comparable values. How could Krispy Kreme have higher profit margin than Starbucks? Their operating profit is much higher than the average limited-service restaurants, but their operating expenses are also much higher than the other comparable companies. Compared to the other quick-service restaurants, Krispy Kreme is much more liquid, but also has a lower inventory turnover. Financial ratios, especially when listed for multiple years in a row, can really expand what you are seeing on the financial statements with just a glance.