That is what makes the company so compliant with the debt that they owe. “ Duke Energy is in compliance with all covenants related to its debt agreements.” (Duke Energy corp., 2010) This can be a very good thing, that way the company has time to pay off debt and not earn more then what they already have. Ratios are used so that companies are able to meet short-term debt. Current ratios and quick ratios are liquidity ratios that help signal complications. Current ratios show relative amount of working capital, while quick ratios show the amount of quick assets by current liabilities.
Which of the following statements is CORRECT? Answer: e. If the interest rate the companies pay on their debt is less than their earning power. (BEP), then Company HD will have the higher ROE. 4. Muscarella Inc. has the following balance sheet and income statement data: Cash $ 14,000 Accounts payable $ 42,000 Receivables 70,000 Other current liabilities 28,000 Inventories 210,000 Total CL $ 70,000 Total CA $294,000 Long-term debt 70,000 Net fixed assets 126,000 Common equity $280,000 Total Assets $420,000 Total liab.
These ratios will be calculated from the income statement, balance sheet and statement of cash flows Liquidity Liquidity Ratios measure a company’s ability to meet its short-term debt obligations without disrupting normal operation. The higher the ratio the better a company will be at meeting its short-term obligations as well as have extra cash to cover any unforeseen cash requirements. The liquidity measures we will use are the current ratio, current cash debt ratio, inventory turnover, average days in inventory, receivable turnover ratio and average collection period. The current ratio measures the company’s ability to pay its short-term liabilities (payables and debt) with short-term assets (cash, receivables and inventory). Tootsie Roll exceeds its ability to meet short-term debt obligations with $3.45 in current assets for every $1 in current liabilities.
Liabilities and Capital Amounts Percent of net sales Total Liabilities and Capital 2,675,250 100.0 Accounts Payable 96,500 3.6 Sale Tax Payable 3,950 0.14 Payroll Tax Payable 15,840 0.59 Accrued Wages Payable 0 — Unearned Revenue 0 — Short-Term Notes Payable 0 — Short-Terms Loan Payable 0 — Total Current Liabilities 116,290 4.3 Long Term Notes Payable 630,000 23.5 Total Long Term Abilities 630,000 23.5 Total Liabilities 746,290 27.9 Owner Equity 746,290 27.9 Net Profit 1,182,670 44.2 Total capital 1,928,960 72.1 Vertical Analysis of Income Statement Revenue: Gross Sales 10,804,000 1.0 Less: Sales Returns and Allowances 7,800 7.2 Net Sales 10,796,200 100.0 Assets Amounts Percent of net sales Cost of Goods Sold: Beginning Inventory 467,890 4.3 Add: Purchases 3,752,891 34.8 Freight In 165,010 1.5 Direct Labor 3,769,591 34.9 Indirect Expenses 748,539 6.9 Less: Ending Inventory 429,090 4.0 Cost of Goods Sold 8,474,831 78.5 Gross Profit 2,321,369 21.5 Expenses: Advertising 263,000 2.4 Amortization 2,700 2.5 Bad Debts 2,300 2.1 Bank Charges 19,258 .1 Charitable Contributions 5,000 4.6 Bonuses 65,000 .6 Systems & Network Contract 82,000
Ratio analysis for TRI illustrates conservative debt levels and ability to service additional debt. By borrowing $17,450,000 to invest in production equipment and technologies, liquidity ratios change little. Similarly, solvency ratios change little except for the free cash flow ratio, affected by capital expenditures but not offset by loan proceeds in the calculation. Profitability ratios will realize improvements; gross profit ratios will increase from reduced labor costs. Net income ratios benefit from improved gross profit calculations but also include increased interest and depreciation expense from the new loan and equipment, lowering net income.
Notes Payable | 12000 | | Interest Payable | 9000 | | Total Current Liabilities | 58500 | | Long Term Liabilities | | | Notes Payable | 28000 | | Total Liabilities | | 86500 | Stockholder's Equity | | | Common Stock | 205500 | | Retained Earnings - December 31 | 97400 | | Total Stockholder's Equity | | 302900 | Total Liabilities & Stockholder's Equity | | 389400 | Elker Fashions Incorporated Closing Entries For Year Ended December 31, 2008 Date | Account Title & Explanation | Debit | Credit | 31-Dec | Merchandise Inventory - December 31 | 80000 | | | Sales | 865800 | | | Purchase Discounts | 16400 | | | Income Summary | | 962200 | | (To record ending inventory and close accounts with credit balances) | | | | | | | 31-Dec | Income Summary | 860100 | | | Depreciation Expense - Buildings | | 12000 | | Depreciation Expense - Equipment | | 10000 | | Gas & Oil Expense | | 7600 | | Salary Expense | | 70700 | | Utilities Expense | | 11400 | | Repair Expense | | 5900 | | Insurance Expense | | 3500 | | Sales Discounts | | 6100 | | Purchases | | 720000
A rising ROE suggests that a company is increasing its ability to generate profit without needing as much capital. It also indicates how well a company's management is deploying the shareholders' capital. In other words, the higher the ROE the better. Falling ROE is usually a problem. CAGR: Operating income, % Operating income (EBIT) measures a company's earning power from ongoing operations and it largely used by investor because it excludes the effects of different capital structures and tax rates used in different companies.
Net working capital | Year 1 | Year 2 | Year 3 | Year 4 | | Inventory | 1,5 | 1,5 | 1,5 | | All in millions | receivables | 16,5 | 12,45 | 8,25 | | | payables | 1,6 | 1,6 | 1 | | | NWC(=Inventory+receivables-payables) | 16,4 | 12,35 | 8,75 | | | Change in NWC | 16,4 | -4,05 | -3,6 | -8,75 | | Q6. FCF = (Revenue – Costs – Depreciation) x (1 – tax rate) + Depreciation – Capital Expenditure – change in working capital. Free cash flows | Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | | Unl Net income | -59,3439 | 70,1337 | 49,3248 | 30,828 | 0 | All in millions | Depreciation | 0 | 8 | 8 | 8 | 0 | | Capital expenditures | 24 | 0 | 0 | 0 | 0 | | Change in NWC | 0 | 16,4 | -4,05 | -3,6 | -8,75 | | Free cash flows | -83,34 | 61,73 | 61,37 | 42,43 | 8,75 | | Q7. | | Year 1 | Year 2 | Year 3 | Year 4 | | NPV per year | -83,34 | 55,12 | 48,93 | 30,20 | 5,56 | All in millions | Total NPV | 56,46 | | | | | | Q8. Rate | NPV(million) | 5% | 74,97 | 10% | 61,35 | 15% | 49,65 | 20% | 39,5 | 25% | 30,63 | 30% | 22,84 | 35% | 15,94 | 40% | 9,81 | 45% | 4,32 | 50% | -0,61 | 55% | -2,89 | 60% | -5,06
Their objectives are often huge which requires a lump-sum to be invested. The older people choose this security also because it gives fixed income which is guaranteed, there is minimal risk and less management needed. 8) What is laddering GICs? Pros and cons? Ans): Laddering GIC(s) is a proven method of investing (also known as a laddering strategy) it can help you reduce the risk of interest rate fluctuations and increase your portfolio's overall return.