We miss essential information like the interest rate and maturity of the debt to calculate the market value of debt. From the book value of debt and the interest expenses over 2007 we estimate the cost of debt: 2,26/43,08 = 5,25 %. This is 0.7% more than the risk free rate. This seems reasonable when considering the low leverage ratio of the firm and high cash reserves of the firm, on the other side the interest coverage ratio of Tottenham of 1,24 is pretty low. We assume that the amount of debt has been constant over 2007.
The net profit for a company in 2009 – This would be quantitative as well since we are seeing the actual profit number for the company. c. The stock exchange on which a company’s stock is traded. – This would be a qualitative element since all we are doing here is categorizing the companies stocks. d. The national debt of the US in 2009. - This would be quantitative as well since we are seeing the national debt for the country.
Ratios include the current ratio, the current cash debt coverage ratio, the receivables turnover ratio, the average collection period, the inventory turnover ratio, and average days in inventory. Current Ratio - Expresses the relationship of current assets to current liabilities. Calculate the current ratio for Kellogg for 2007 and 2006 What do the measures tell us? A current ratio of .67 means that for every dollar of current liabilities, Kellogg has $0.67 of current assets. Cash Debt Coverage Ratio - Because it uses cash provided by operating activities, it may provide a better representation of liquidity.
AT & T Executive Summary Acc280 Charles Cornett April 19, 2010 AT & T Executive Summary Current Assets The two largest current assets for At & T in 2008 was property, plant and equipment and goodwill and in 2009 it was the same assets as in 2008. Property, plant and equipment assets in 2008 was $99,088,000.00 and goodwill was $71,829,000.00 in 2008. In 2009 property, plant and equipment assets were $100,093,000.00 and goodwill was $73,259,000.00. Property, plant and equipment is stated at cost, except for assets acquired using purchase accounting, which are recorded at fair value (www.at&t.com). The cost of additions and substantial improvements to property, plant and equipment is capitalized (www.at&t.com).
Comparing the company’s net income to its actual cash generated, an investor can determine whether the company is more aggressive or conservative in accounting for its performance. 2. What are the incremental cash flows for the project in years 1 through 5 and how do these cash flows differ from accounting profits or earnings? Year 1 - Free Cash Flow: 7,512,000; Accounting Profits Earned: 7,154,500 Year 2 - Free Cash Flow: 14,972,000; Accounting Profits Earned: 12,340,000 Year 3 - Free Cash Flow: 15,288,000; Accounting Profits Earned: 14,110,000 Year 4 - Free Cash Flow: 8,736,000; Accounting Profits Earned: 8,190,000 Year 5 - Free Cash Flow:
TARGET CORPORATION FINANCIAL ANALYSIS AND INTERPRETATION The ability of a business to meet its short-term cash requirements is called liquidity. It is affected by the timing of a company’s cash inflows and outflows along with prospects for future performance. Efficiency refers to how productive a company is in using its assets, and it is usually measured relative to how much revenue is generated from a particular level of assets. They are both important and complementary. Two measures for evaluating a business's short-term liquidity are working capital and the current ratio.
EXERCISE 1-2 a. Investors put assets into the company with the expectation of sharing profits. Creditors lend assets to the company with the expectation of repayment of the principal plus interest on the loan. b. Kennedy Company Accounting Equation Event Assets = Liabilities + Stockholders’ Equity Cash Notes Payable Common Stock Retained Earnings Acquired assets $3,400 $1,600 $1,800 Incurred loss (1,600) (1,600) Balance $1,800 = $1,600 + $1,800 $(1,600) The cash balance of $1,800 will be distributed first to the creditors. Since the company owed $1,600 to creditors and there are sufficient funds to pay them, the creditors will receive $1,600.
Both methods can be used, but the company should choose which method would be a good fit for their company. Cash basis accounting method is strictly cash in, cash out basis. This means that financial transactions are recorded only when money is given or paid (Kimmel, Weygant, & Kieso, 2009). Cash basis is used mostly by small business where owners want a simple way of understanding their financial statement just to see if there is a profit or loss in the company. The income and expense is more accurate (“Cash Basis”, 2004-2013).
In March 2009, the Monetary Policy Committee (MPC) announced that it would reduce the interest rate to 0.5%, which is the lowest it has ever been in the UK. The Committee also saw that the interest rate could not practically be reduced below that level, and in order to give a further monetary stimulus to the economy, it decided to undertake a series of asset purchases. Between March 2009 and January 2010, the MPC authorised the purchase of £200 billion worth of assets, mostly gilts (a UK government liability in sterling to fund its borrowing). The MPC voted to begin further purchases of £75 billion in October 2011 and, subsequently, at its meeting in February 2012 the Committee decided to purchase £50 billion to bring total asset purchases to £325 billion. Figure 1 above breaks down the QE process.
They assess potential risks before making investment decisions which is shown through Bob and Maggie refusing to take out a loan when they don’t have the means to make repayments as the majority of their money is tied up to their inventory, and their inventory faces a huge unpredictable risk from the weather. In addition Bob and Maggie both have calculations and predictions made using information available to them showing efficiency and awareness of the market conditions; alongside this Maggie’s conservative nature in regards to cost saving has helped them garner up more cash. The company’s weaknesses seem to be their low liquidity levels, which could see them in financial difficulty in an unexpected change in the market conditions, or potentially hazardous weather that could damage their inventory. To add to this risk Maggie has a strong deterrence towards any type of debt financing. 2.