No, because the yields for treasury instruments are very low at the time, so the premium the company will add to their rate is very low, and the investors will get less money for the same level of riskiness, so the paper is not really cheap. YTMs for these 4 issues are the following: 2013 notes: 0.93% 2015 notes: 1.72% 2020 notes: 3.06% 2040 notes: 4.56% c. The YTM is differing from the coupon rate because these notes are selling at a discount price. The YTMs should be compared with the coupon rate. d. Microsoft issued 4 papers instead of one is because risk diverse, with only 1 paper there is a great risk for them, what if people do not want to buy the type of paper they issued, with the 4 papers people can get different options, some people want long term paper and some people want short term paper. Microsoft can decrease the risk of losing with 4 papers.
The exit of New Victor could take more time than expected if the company does not meet the conditions in a favorably way. Bob Fisher’s Assumptions for the third Strategy: 1. Due to the impact of economic crisis on the company’s cash flow, lenders will be more reluctant to refinance the company’s existing debt. 2. How would the other claimholders (Tiger, the Management Team and the Lenders) evaluate each of the 3 strategies?
In addition, the lower transaction costs and computer technology enabled the bundling together of smaller loans into standard debt securities. When housing prices decrease, especially when the house price is below the loan payable, borrowers may refuse to pay the rest of the loan, and this will deteriorate banks’ balance sheet, then people will afraid that they can’t get their savings back from the bank. The amount of money withdrawn will increase and become bank panic more seriously. Because every bank is linked together, and every bank has little money for lending, those firms who need loans are hard to get investment; hence the whole economic activities become worse. There are three policy measures might be helpful to reduce the frequency of banking and financial crisis, which are measure the requirement of sufficient capital for financial institutions; measure is that only the market participants who with thorough understanding of hybrid securities and their associated risks can trade in the market; the leverage firms, restricting the leverage ratio for these firms.
Task 8 part 1 |Ratio |Calculation |Answer for 2009 |Explain how this can this ratio be used to monitor performance | |Current ratio |Current assets/current |6178/1391=0.44:1 |This ratio shows that they are not in a strong position to pay long term debut because they have | | |liabilities | |got less current assets than current liabilities. Tesco can’t pay short term debut which means it | | | | |has weak liquidity. In order to pay of the short debut they would have to have an increase in | | | | |sales or they would have to take out an additional loan, this would be accessible because the bank| | | | |knows that Tesco is a big store and can afford to pay people back. | |Acid Test |(Current assets – stock)/ |6178-2669=3509/1391=0.25:1 |This shows the ability to pay short term debut without selling stock first. The ideal answer for | | |current liabilities | |this ratio is 1:1, Tesco is way under this ideal ratio which means they’re in a poor position to | | | | |pay short term debuts because they have four times as many debuts than they have current assets.
The different opinions given by different parties can be concluded for the following three: taking a loan in pounds; borrowing in dollars; half pounds and half dollars loan. When the market undervalued the pound, the pound continues to go down, which means borrowing in more pounds and returning less pounds so the company does a good hedge. Under this circumstance, both the local management and the Director of Foreign Exchange were right. The second suggestion is to borrow dollars, which I think it’s not that rational. As some staffers at headquarters said using dollar denominated debt was more prudent as semiconductor business was “dollar driven” business.
This can be achieved by exploiting a higher cost of capital in an investment decision or by setting a capital budget limit. Corporation would like to implement it in situations that the returns of past investments were lower than expected. The main advantage of capital rationing is the efficient use of the company’s corporate resources by enforcing strict budgeting of company’s corporate resources to focus on the higher return projects or investments. In addition, it prevents the wastage of corporate resources by investing on the unavailable or lower returns projects. Also, imposing capital budgets lead the company to focus on the less number of comparatively higher return projects and so number of active projects can be kept in minimal and projects or investments can be managed better.
Computed by deducting the cost of capital from the after-tax profit, it is said to be the best measure of the true profitability of an enterprise because it is tied to cash flow and not earnings per share. Many analysts would agree that EVA is more positively associated with a company’s stock price than ROE or EPS. Keith confirmed his findings with an industry analyst, which posed him with the decision of whether of not to implement this calculation into OSI accounting practices. Furthermore, would it be a beneficial tool to be used for evaluating the new manager’s incentive compensation plans? The EVA trend seems to be almost mandatory for the larger companies, but there is no reason that it shouldn’t work just as well for their smaller firm.
Therefore, the company faces to problems with turning assets into cash. Moreover a low ratio of receivables turnover implies the company should re-assess its credit policies in order to ensure the timely collection of imparted credit that is not earning interest for the firm. As for a low quick ration relatively to a current ratio tells us, that the inventory is high, meaning there are troubles with selling. They, in turn lead to a low profit margin. 2) Calculate the operating cycle.
Since current ratio is a measure of short-term liquidity, this is not attractive for short-term creditors. This might be due to excessive inventory. The company experienced a decreasing trend from 2008 to 2009. The quick ratio for P & G for 2009 was .49 while the industry ratio was .7. This shows us that the ratios of the company and industry come much closer when inventory, which is relatively illiquid, is subtracted from current assets so it shows that one reason P & G is experiencing low liquidity is the amount of inventory held.
The bank had too many products for the customer base it was catering. So the target was to identify the profitable and non-profitable products and customers and devise the appropriate strategic plans to increase its profit levels. THE PROBLEM The organization is facing with a high cost-income ratio and hence as a result was suffering operational losses. FLAWS IN TRADITIONAL COSTING SYSTEM • Cost centers were geographical and departmental • Center HQ expenses were allocated to operating expenses. This approach couldn’t identify and relate the activity costs to the respective products.