The final advantage enjoyed by AMSC is that they can keep the financial flexibility described in Aswath Damodaran’s presentation: The Debt-Equity Trade Off: The Capital Structure Decision. According to the presentation, when a firm borrows up to its capacity, it loses the flexibility of financing future projects with debt. AMSC retained that flexibility by opting for equity financing. With those advantages also come various disadvantages. First, payments on debt interest are tax deductible but payments on equity are not.
A defined contribution plan is a plan that does not pay a specific benefit when you retire, but allows you to save money in a tax-deferred account. A 401k is a common type of defined-contribution plan. At retirement, you withdraw this money over time for living expenses. Your employer usually contributes to a defined-contribution plan also, either in the form of a match of some portion of your contributions or a fixed amount. It is first helpful to consider the basic context and premise of both the defined benefit and the defined contribution retirement plan.
The computation of ratios facilitates the comparison of firms which differ in size. Ratios can be used to compare a firm's financial performance with industry averages. In addition, ratios can be used in a form of trend analysis to identify areas where performance has improved or deteriorated over time. Because Ratio Analysis is based upon Accounting information, its effectiveness is limited by the distortions which arise in financial statements due to such things as Historical Cost Accounting and inflation. Therefore, Ratio Analysis should only be used as a first step in financial analysis, to obtain a quick indication of a firm's performance and to identify areas which need to be investigated further Profitability.
Dawn, Lind, and Mike forming their business relationship under the label Colored Custom Sheets, CCS will encounter several issues regarding both tax and nontax issues which may differ across entity types. For example, when considering tax issues across entity types, if Dawn, Lind, and Mike elect to select the limited liability company, they will need to understand that by default all profit and loses are passed though the business to its owners. The owners are also required to report income and losses on their personal tax returns when selecting the limited liability company structure. This also holds truth for sole proprietor or partnerships. The taxation is considered to be the simplest form and can be filed for a variety of different classifications of tax on form 8832.
Financial Ratio Analysis of Dr. Pepper Snapple Group Liquidity ratios for a company help whomever is analyzing the data determine the company’s liquidity. When a company has good liquidity they are able to pay off their short term debt without having to take out any additional financing. We will look at Dr. Pepper Snapple Group’s current ratio for 2009 and 2010. The current ratio is calculated by taking the company’s current assets and dividing it by the current liabilities. It shows how many times the current assets can cover the current liabilities.
Although Wal-Mart does not appear to be overburdened with debt, the company should pay attention to its borrowing additional money. (http://www.linkshop.com.cn/web/oversea_show.aspx?ArticleId=163358) Debt to net worth ratio Wal-Mart’s debt net worth ratio is about 0.69: 1. That means Wal-Mart owes creditors $0.69 for every $1 of equity that it owns. The tangible net worth ratio is about 148584 million dollars, and its total debt is 102326 million dollars as is mentioned above. Learning about other companies this ratio, Wal-Mart’s debt to net worth ratio is not an exorbitant amount of debt, the company’s borrowing capacity is not bad, it is associated with a higher level of financial security, giving the business greater borrowing potential.
Circuit City The objectives of this case are to improve your understanding of capital structure issues and off balance sheet financing, with an improvement in mastery of cash flow analytics and distortions. Barry M Frohlinger Circuit City Stores Case Barry M Frohlinger copyright 2003 www.learnfrombarry.com 1 Circuit City Stores financial statements are attached. In addition, find financial information on Best Buy, Circuit City’s largest competitor. [We will use the competitor information later for analysis]. You should be aware that Circuit City has a credit card operation, managed by its wholly-owned captive bank while Best Buy does not operate a credit card operation.
Integrative Problem FIN 370 Organizations spend a significant amount of time and resources on capital budgeting processes before entering into any type of contract or investment. Caldonia like other organizations use the capital-budgeting processes to provide a clear understanding of cash flows of before determining the profitability and risks of a proposed project. As a recent new hire in the financial department at Caledonia Products, I have been tasked to evaluate the calculations of cash flows involved in investing in a new product, and consider the factors involved in either leasing or purchasing equipment. The financial analyst must calculate the organizations net present value, payback period, and IRR (internal rate of return against the projected interest rate to determine which project is most lucrative. Caldonia is presently considering two projects, both that have an 11% rate of return and negative net value of $100,000 the first year.
However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part. Other types of business expenses include • Insurance - Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession. • Employees' Pay - You can generally deduct the pay you give your employees for the services they perform for your business. • Retirement Plans - Retirement plans are savings plans that offer you tax advantages to set aside money for
The income and expense is more accurate (“Cash Basis”, 2004-2013). In the accrual basis accounting method income is reported in the period it is earned, regardless of when it is received, and expenses are recorded when they have incurred even if it were paid (Kimmel, Weygant, & Kieso, 2009). According to Entrepreneur Media, Inc. (2013), the accrual method requires a business’s annual sales be over $5million and its venture be structured as a corporation. Also businesses with inventory is to use the accrual basis as well, and it is highly recommended to use the accrual basis if the business sells or pays on credit. Cash basis will always see income when the money is received.