If the cash is higher than the net income, the company’s net income is of high quality. If the cash is lower than the net income, the company’s net income is not turning into cash and a red flag should go up. Having more cash than the net income can mean shareholders will receive an increase in dividends can reduce debt, buy back stocks, or purchase another company. According to, the cash flow statement Home Depot, Incorporated is similar to fiscal year 2007. In fiscal year 2008, Home Depot Incorporated generated $5.5 billion of cash flow from operations and used $2.0 billion to repay short-term debt and other obligations plus $1.8 billion for capital expenditures and $1.5 billion in dividends.
Executive Summary The recommendation for Teletech Corporation is to change from a constant hurdle rate to the use of two risk-adjusted hurdle rates, one for each segment. Teletech’s performance is evaluated upon economic profit calculations. Through this performance measure, the risk-adjusted hurdle rates return a higher amount of profit in comparison to a single corporate hurdle rate: Currently, the firm has been using the constant hurdle rate of 9.30%, and as a result the firm’s share prices are stagnant. In comparison, the market and industry indexes such as telecommunications and telecommunication equipment have outperformed Teletech. Their price-to-earnings ratio is also below investor’s expectation in comparison to the company’s risk.
Other things equal they prefer to pay more for stocks that are more risky and have uncertain cash flows. • Investors are risk averse. Other things equal they prefer to pay more for stocks that are less risky and that have relatively certain cash flows than other stocks. When determining the value of a firm, which of the following statements is ture? • A financial asset is considered to have value if it has the ability to generate positive cash flows.
The profit percentage of assets varies by industry, but in general, the higher the ROA the better. We can see a good trend over years in the company. Comments: Return on equity (ROE) is a measure of profitability that calculates how many dollars of profit a company generates with each dollar of shareholders' equity. The formula for ROE is: ROE is more than a measure of profit; it's a measure of efficiency. A rising ROE suggests that a company is increasing its ability to generate profit without needing as much capital.
The main focus of the company should be on the incremental cash flow because this holds a marginal benefit from the project. Depreciation is qualified as an expense: therefore, and the larger the depreciation the larger the expense. From the accounting profits point the profit would be much lower than on the free cash flow. 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?
The ROE for Sepracor is 33.07%, which means that 33.07 cents of assets are created for each dollar that was originally invested. It measures how Sepracor is using its money. The higher the return on equity, the more funds available to be invested in improving business operations without having to invest more capital. Debt to asset ratio measures the company’s solvency, and the higher the ratio, the lower the borrowing capacity for the company. I would make an investment in the company’s 5% convertible bonds.
e. Do you expect that those notes will be called or redeemed? a. MSFT is raising money for general corporate purposes, which may include funding for working capital, capital expenditures, repurchases of stock and acquisitions. Also they choose to raise money at this time because the yields for treasury instruments are low, so Microsoft can issue in a lower rate. b. 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.
If the gross profit falls from one year to the next or is thought to be too low the firm may need to decrease the costs of its purchases or may try to increase the sales without increasing the cost of the goods sold. The same thing applies to the net profit margin if it is too low or falls year on year then the business may need to look for cheaper premises or cut staffing costs. Return on Capital Employed will be used to see if an investment is worth the capital outlay, if the return from the capital outlay is higher than the interest offered by banks for money invested then the outlay is justified. you then have to talk about Liquidity,The Debtors’ and creditors’ and then an overview of it all
o Capital Requirements: There are high capital requirements to enter the industry. (satellite cost=20 billion) o Economics of Scale: Because of the low monthly fees, the o revenues of the industry must be driven by economics of scale • Threat of Substitutes-Moderate The threat of substitute is when the product or service provided by a firm’s competitor meets the same needs as the ones being offered. Substitutes place the ceiling on the prices that an industry can charge and on the profits that can be earned. Because of the limitations of substitutes, the threat of substitutes for XM is moderate. o AM/FM radio: Has a cheaper price but doesn’t allow customers to hear commercial free radio o Internet radio: Has a higher monthly cost and some areas may not have access.
When comparing these aspects from foreign countries to aspects of the United States, one side is clearly more preferable. If one is looking for a prevailing quality of life, the United States is the inferior one choice when compared to other nations. When evaluating quality of life it is difficult to clearly have set criteria to base it off of. If evaluating quality of life, wealth of the nation does not overshadow other aspects for this concept. For example, “The main reason the United States if richer is because...they work about 20% more hours per year than Europeans (newfederalist).” Based off of this study, we see that while Americans are wealthier, they are working a lot more strenuously to make this money.