For these reasons, it is necessary to analyze the competitive advantage of the different options presented. • Strengths and Opportunities: The project evaluation should consider a SWOT analysis of each potential application, which allows identifying the strengths, opportunities, threats and weaknesses. This way, it is possible to choose the best option, which maximized the firm’s strengths and opportunities, while mitigating its threats and weaknesses. • Barrier to Entry: Also it is necessary to analyze the cost of enter to the industry. • Economic Benefit: What will be the earnings associated to the project.. • Customer Preferences Bernstein should recommend to the board the
Liquidity Ratios Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. The current ratio is the ratio of current assets to current liabilities: Current Ratio | = | Current Assets | | Current Liabilities | | * Interpretation: Current ratio comes from total assets divided by current liabilities. Current assets include cash, accounts and notes receivable (less reserves for bad debts), advances on inventories, merchandise inventories, and marketable securities. This ratio measures the degree to which current assets cover current liabilities. The higher the ratio the more assurance exists that the retirement of current liabilities can be made.
Review the tutorial from the lecture and the tutorial from the Financial Software page. Remember that your proposed Financial Plan should match the characteristics of your Industry Analysis. 2. Complete the Financial Plan. After working with the team, the component manager will develop your Financial Plan (described in detail in this unit’s lecture).
EC100 REINHARDT CAPITAL BUDGETING: How a business firm decides whether or not to acquire durable real assets In this write-up, I shall explain as simply as is possible (1) how modern business firms decide whether or not to purchase with the firm’s investible funds long-lived assets (land, machines, buildings) that will be used by the firm for more than one period and (2) how they finance these purchases. We shall explore the second question first and then illustrate the first with a numerical example. In the end, we shall explore cool, trick question with which you can annoy people in high finance—your own parents possibly among them. A. WHENCE DOES THE FIRM GET ITS FUNDS, AND WHAT IS THE COST TO THE FIRM PER DOLLAR AND PER YEAR OF SUCH
The balance sheet connects to income statements, in turn also connected to cash flow statement. Occurrences or a change to the net cash activities of the cash flow statement affects the balance sheet. The balance sheet is useful when estimating the potential of the organization in order for them to achieve there long-term mission. However, cash flow statement displays the exchange of currency among an organization and external agents. For example, the cash flow can be affected when the company purchases products, and if the costs of the products are an outstanding amount in turn it will affect the assets on the balance sheet.
Answers for 11-12-13 11- Each firm has an optimal capital structure, defined as that mix of debt, preferred, and common equity that causes its stock price to be maximized. A value-maximizing firm will determine its optimal capital structure, use it as a target, and then raise new capital in a manner designed to keep the actual capital structure on target over time. The target proportions of debt, preferred stock, and common equity, along with the costs of those components, are used to calculate the firm’s weighted average cost of capital, WACC. The weights could be based either on the accounting values shown on the firm’s balance sheet (book values) or on the market values of the different securities. Theoretically, the weights should be based on market values, but if a firm’s book value weights are reasonably close to its market value weights, book value weights can be used as a proxy for market value weights.
Option (A) provides a clearer picture on how the stock options affect the company’s equity through the balance sheet. Expense: An expense represents the actual or expected cash outflow that results from an entity’s ongoing major or central operations. Option (A) values the compensation based on the value of the stock options. Therefore, this transaction
This determines the point in which a profit begins to be turned. c. What deficiencies does payback have as a capital budgeting decision method? d. Does payback provide any useful information regarding capital budgeting decisions? e.
What impact does these interest rate swaps have on the bank’s interest rate sensitivity, liquidity, accounting ratios and capital ratios? Make sure you work through the Appendix to the case. Interest rate risk : is the unexpected changes in the interest rate which can alter the bank’s profitability and the market value of equity. To hedge against interest rate risk a verity of techniques can be used that are classifieds into direct and synthetic methods. The direct method is relies on changing the contractual characteristics of Asset and Liabilities to reach a particular duration and maturity gap to get over any Asset and Liability mismatch.
That is, what aspects of the firm’s activities should Koh focus on especially? 4. What is Star River’s weighted-average cost of capital (WACC)? What methods did you use to estimate WACC? What are the key assumptions that especially influence WACC?