A firm’s value depends on the positive net income generated in the past. True False A firm’s value depends on the firm’s ability to generate positive cash flows now and in the future True False When determining the value of a firm, which of the following statements is true? • Inversters are risk neutral. Other things equal they prefer to pay more stocks that are less risky and have uncertain cash flows • Investers love risk. Other things equal they prefer to pay more for stocks that are more risky and have uncertain cash flows.
A rising ROE suggests that a company is increasing its ability to generate profit without needing as much capital. It also indicates how well a company's management is deploying the shareholders' capital. In other words, the higher the ROE the better. Falling ROE is usually a problem. CAGR: Operating income, % Operating income (EBIT) measures a company's earning power from ongoing operations and it largely used by investor because it excludes the effects of different capital structures and tax rates used in different companies.
A higher sales revenue will occur for etisalat which means the income the company receives from business activities, usually happen from sale of goods and services to customers. Etisalat will also have more opportunities to invest in upcoming projects. If the opposite occurs and etisalat has low availability and higher costs it would mean, people spend less on their goods/services which would mean there’s a low
With these potential benefits, target companies will often agree to be purchased when they know they cannot survive alone. Here the issue is of financing the merger. A firm’s optimal capital structure is that mixture of debt and equity than minimizes its weighted average cost of capital (WACC). Since the after-tax cost of debt is lower than equity for many corporations. It turns out that, while debt reduces a company’s tax liability because interest payments are deductible expenses, increasing amounts of debt raise both the cost of equity capital and the interest rate on debt because of the increasing probability of bankruptcy.
Investors find this information lucrative because the more expendable cash a company has the more likely they are to pay out in dividends for the stock holders.. Liquidity Ratios: Current assets are a business's total current assets divided by its total current liabilities. Total Current Asset / Total Current liabilities 1,971,000 / 116,290 16.949 = 16.9 Current Ratio- 16.9:1 or 17:1 (16.9 to 1 or 17 to
The Home Depot cash flow shows significant net earnings and the cash flow statement does not indicate a drastic drop from previous years. A potential investor would find this information important when evaluating the company. This information would allow investors an insight into how The Home Depot manages its cash in light of potential losses in the revenue
Going back to the selling to customers with a higher credit risk, while they say that they will review the aging of the accounts receivable on a daily basis, is that possible for Loren to do on top of all the other work that needs to be done? Or in this case would they need to hire another person to take some of Loren’s workload which would in the end cost even more money for the company. In each of these situations they are talking about spending more money to keep away from the risks that are mentioned, but if they get to the point where they are losing money because of the risk and also because of the extra position that they added, they could be in really big trouble
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
In a highly competitive business world, on a firm’s priority list is the subject of increasing profit and reducing cost. One might than pose the question, has this put them out of business (mom and pop store)? The answer is absolutely not, but rather, they too benefit from cheaper prices as they continue to buy in bulk and continue to operate as the name suggest, convenient
Additionally, analysis of the external environment suggests unmet targets in the supercenters business. Therefore, this presents Wal-Mart with an opportunity to continue with its current supercenters strategy. The emergence of new locations and store types present Wal-Mart with an opportunity to exploit market development through diversification to mall-based