Answer: e. Company HD has a lower times interest earned (TIE) ratio. 3. Companies HD and LD have the same total assets, sales, operating costs, and tax rates and they pay the same interest rate on their debt. However, company HD has a higher debt ratio. Which of the following statements is CORRECT?
Business Accounting SIGNature overall cash flow forecast was positive, which was really good. This is because SIGNature, cash inflows during a period of time are higher than the cash outflows during the same period. This doesn’t necessarily mean profit for the business, but it is mainly due to a careful management of cash inflows and expenditure. Overall SIGNature looks like a viable business with a positive cash flow, however they may face a few cash flow problems. A cash flow problem is when there is an insufficient amount of money to meet the end of month/year bills.
ABC Corporation Case Ashley White Hudson; Kim Crayton; Brenda Fountain; Latisha Blackmon ETH 376 May 28th, 2012 Juan C. Vargas ABC Corporation Case ABC Corporation is a large publically held corporation that is in the process of being audited by external auditors from the CPA firm, Green & Associates. Issues relating to audit opinions, internal controls, valuation methods, compliance with SOX, GAAS, and GAAP rules and ethical points involving ABC Corporation and Green & Associates will be discussed. ABC Corporation was utilizing the FIFO inventory method for the current year to declare a lower gross profit which reflects a lower net income in order to pay lower taxes and increase their cash flow. FIFO method is used when a company uses old inventory first (First In First Out) so that they can prevent the inventory from being obsolescence and/or be sold at a stable price. By using this method the income statement shows a higher income due to the lower value of the cost of goods sold.
What is the relationship between dividend yield and capital gains yield over time under constant growth assumptions? Under constant growth assumptions, the relationship between the dividend yield and capital gains yield is they both remain constant. 3. A successful joint venture is expected to result in the 4.0% growth rate until 2000 but would increase the company’s normal growth to a constant 8% after that time. The joint venture is also expected to increase investors required return to 9.5% A.
Option two is the choice because the $2,716 savings difference in total interest from option two outweighs the $1,043 in interest savings from option one. Here the simulator reveals that loan option one is the correct choice. Loan option one is the best choice to solve the working capital shortfall because even though it has a higher interest rate, there is no prepayment limitation and has a total interest payment of only $32,603 after three months. The Financial Dictionary explains that “prepayment is good for the borrower because it relieves him/her of the debt, but it deprives the lender of interest he/she would have received otherwise” (Financial Dictionary, p. 1,
This calculates how much of the business is financed through private investors; it is also expressed in percentage form. Generally speaking, as a firm's debt-to-equity ratio increases, it becomes more risky because if it becomes unable to meet its debt obligations, it will be forced into bankruptcy. (Glakas) Of the three companies, Wal-Mart has the lowest total debt ratio (.62) as well as the lowest overall debt to equity ratio (1.65). Target finds itself with similar footing at .65 and 1.89 respectively, however Kroger has over 80% of its operations (.81) financed with debt and has the worst three year average when it comes to debt to equity with 4.40 times.
Write at least one paragraph. Buying an extra copier would probably be a good choice, since the amount of revenue lost almost doubles (US$17,805.50 vs. US$8,000.00) the cost of buying an extra copier. I feel confident with my answer, although there are some limitations to it. As was mentioned before, the sum of the weeks will not always add up to 1 years’ worth, so that needs to be taken into account. Also, this simulation must be run several times to find the average amount
James River’s Price was $20.98 at the beginning of 1995. What conditions must hold to use the constant growth model? Do many “real world” stocks justify the constant growth assumptions? The dividends grow at a constant rate forever to use the constant growth model. No, many “real world” stocks do not satisfy the constant growth hypothesis because the real world circumstances can be unpredictable and harder to forecast so being able to continually grow your business at a specific rate each year is difficult.
Since debt and equity levels are closely related there is an analysis called the “DuPont model” that systematically breaks ROE into components so that each can be evaluated. ROE = NI x EBT x EBIT x Sales x Total assets EBT EBIT Sales Total assets Common equity EBT = earnings before taxes. The first ratio measures the proportion of earnings before tax that is kept by the company. EBIT = earnings before interest and taxes. The second ratio measures the effect of interest; it indicates the proportion of earnings before interest and tax that is retained after paying interest.
During the intermeeting period the financial markets were able to stay the same. In a statement from the FOMC “Growth in household spending picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, while investment in nonresidential structures is still weak. Employers remain reluctant to add to payrolls” (Board of Governors Federal Reserve System, 2011).” In November, the committee decides to continue increasing its holdings of securities to promote a stronger pace of economic recovery. They also made this decision to help ensure that inflation is a consistent level with its mandate.