By using this method the income statement shows a higher income due to the lower value of the cost of goods sold. The balance sheet would also show a higher value for the inventory that is on hand. ABC Company wanted to show that their expenses were lower and their income was higher than what it actually was, resulting in a higher retained earnings value at the end of the period. To the public, it would look as though the company is thriving and paying out larger dividends to stockholders. Stockholders may assume when reading the financial statements that they would be receiving a higher return each month or quarter when in reality that would not be the case especially if they are planning on switching to LIFO.
Analyse the impact of budgeting changing… Impact of changing Ms.Wangs expenditure and income is that in Wang 1 she was earning less cash sales then in the revised. An example of this is in sales during the month of February the total was £2000, and then in the revised she sold £2051 so she gains an extra cash sales of £51. This is favourable for Ms.Wang as she has gained money. Budgeting has enabled Tidy Team to gain more sales, which means more of a cash flow forecast. Throughout the months January to December all of Tidy Team’s cash sales were favourable.
over the 3-year period from 2003 to 2005. Total assets dropped $1 million, or 3%, but remain near $35 million. The most notable asset change is the $500,000, or 8%, decrease in accounts receivable. However, cash did increase $200,000 which gives the company the opportunity for business investment in the coming fiscal year (“University of Phoenix,” 2006). A positive trend shows that total liabilities have dropped $1.7 million, which is accounted for by a $2 million, or 42%, decrease in long-term debt.
The return on equity for 2012 was at -1.81% compared to a 32% return on a wedding in 2011. (http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsAnnual) Amazon had a downward trend on their return which could be an unhealthy position to be in if the trend continues into the year ending December 2013. Amazon did improve day’s receivable on average collection period. In 2012 days receivable was 81.2 days which was a decrease in time compared to 2011 for which day’s receivable was 87 days. As seen on the income statement by accounts receivable and annual credit sales Amazon was able to decrease the amount of days it took to collect on accounts receivable.
Using product offered by Continental Bank would require a higher cost for J&L, and illiquid compared with NYMEX. However, they won’t need to post a margin at the beginning of the contract. The use of a monthly average price a net would be an advantage to J&L. 3. Using the estimate of 4.5 million gallons per month, how would you construct a futures hedge for the next 12 months?
Marriott estimates its equity beta to be 1.11. Based on this information, if Marriott had no debt in their capital structure, I believe their equity beta would be lower, more in line with the S&P 500, because adding debt to a firm increases leverage in their operations. If a firm has more leverage, they have more room to take risks and this reflects a higher beta, which in turn leads to greater returns. This series of events is one of the main factors as to what lead to the immense growth of Marriott throughout the 1980’s. Note: I am not
3. What estimate of the market risk premium should be employed in calculating the cost of capital for Ameritrade? 4. Ameritrade does not have a beta estimate since the firm has been publicly traded for only a short time period. Exhibit 4 provides various choices of comparable firms.
Exhibit 7: By a raising current ratio, we can see that Krispy Kreme is much more able to pay debt within the next year. This is good because even though there are a lot of equity issues going on in the business, they are not going to go bankrupt. Exhibit 9: One thing that really stands out in this exhibit is the miniscule amount of debt Krispy Kreme uses. I think they should leverage themselves to somewhat close to the industry average (around 35% current debt, and 42% long-term debt) to build some organic growth and get away from the business model that is bound to slow down. Financial ratios are a good indicator of a company’s health because they compare certain numbers to other related numbers.
However, the company was not able to sustain the growth in sales between years 7 and 8, which resulted in a decrease in net sales of -15% or $897,000. The company’s loss in net sales in year 8 is a weakness due to overall sales being down. Cost of goods sold (COGS) between years 6 and 7 show an increase of 31.8% or $1,048M. The increase in COGS corresponds closely with the increase in net sales for the same time period, which illustrates the company’s ability to effectively control its inventory levels and material costs. For years 7 and 8, the cost of goods sold decreased by -14.5% or $630,400, which again corresponds to the change in net sales for the same period.
Regarding operating gains and losses, in 2005 Tiffany realized gains of 33.8 million versus 150.7 million in losses in 2004. However, more importantly, Tiffany & Co. decreased inventories in fiscal 2005 from 175.4 million to 43.6 million. This significant reduction in inventory expense within its cash flow operations aided in Tiffany’s substantial increase in cash reserves for fiscal 2005. Increased Inventories and Operating Losses in 2006 In comparison, Tiffany’s net cash reserves in 2006 decreased to 176.5 million from 393.6 in the prior year. The company’s net cash from operations also decreased from 262.69 million to 233.58 million in 2005, a difference of 29.1 million.