...instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work and materials from it should never be made available to students except by instructors using the accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials. If you purchased this work within the United States or Canada you should be aware that it has been imported without the approval of the Publisher or the Author. Editorial Director: Natalie Anderson Acquisitions Editor: Julie Broich Editorial Project Manager: Karen Kirincich Production Project Manager: Judy Leale Operations Specialist: Ben Smith Copyright © 2010, 2008, 2006, 2005, 2003 Pearson Education, Inc., publishing as Prentice Hall, One Lake Street, Upper Saddle River, New Jersey 07458. All rights reserved. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval...
Words: 660 - Pages: 3
...The four general phases of the working capital cycle are the purchasing of resources that relates to the acquisition of supplies and labor, such as the amount of inventory that is necessary to maintain realistic production schedules and the staff required to ensure adequate provision of services. Production and sale are virtually the same in the healthcare industry; there is no inventory of product of services. Billing represents the interval between the release or discharge of a patient and the generation of a bill. Collection represents the interval between the generation of a bill and the actual collection of the cash from the patient or the patient’s third-party payer. Estimating those four general phases of working capital cycle is critical to cash budgeting and therefore to cash planning. The three primary sources of short-term funds are Single-Payment Loan, which is the simplest credit arrangement and is usually given for a specific purpose, such as the purchase of inventory. The note can be on either a discount or an add-on basis. The discount arrangement, the interest is computed and deducted from the face value of the original loan. The actual proceeds of the loan, then, would be in an amount less than the face of the note. In an add-on note, the interest is added to the final payment of the loan. In this particular arrangement, the borrower receives the full value of the loan when the loan is originated. Lastly, a revolving credit is pretty similar to a...
Words: 469 - Pages: 2
...calculating APR • We will go over math on Thursday • This math will be the math for Test 4 Cash Conversion Cycle -From investopedia.com (3 definitions) • A metric that expresses the length of time, in days, that takes for a company to convert resource inputs into cash flows • The cash conversion cycle attempts to measure the amount of time each net input dollar is tied up in the production and sales process before it is converted into cash through sales to customers. • This metric looks at the amount of time needed to sell inventory, the amount of time needed to collect receivables and the length of time the company is afforded to pay its bills without incurring penalties. -Commercial and industrial loans represent the earliest form of lending that banks varied out in their more than 2000 years of history -close to 1/5 of commercial bank loans loan portfolio is classified as business or C&I loan Short-Term Business Loans • Self-Liquidating Inventory Loans- business loans, usually to support the purchase of inventories, in which the credit is gradually repaid by the borrowing customer as inventory is sold (60-90 days). o Usually related to the borrowers need for short term cash to finance purchases of inventory or cover production costs, the payment of taxes, interest payments on debt, and dividend payments to stock holders. • Working Capital Loans- loans that provide business with short-term credit lasting from a few days to one year and that re often...
Words: 1278 - Pages: 6
...Capital Structure Recommendation There are a number of capital structure options available to provide funding for a Canadian expansion. Capital structure strategy should have two main objectives: align with operating strategy and maximize total shareholder returns. Too much debt leverage can lead to credit default and insolvency. Capital financing using bonds has risks because some types of bonds may place responsibility on the company to provide dividends, which could impact shareholder earnings. Capital structure is how operations and growth are financed. Different sources may be used; a combination of long term debt, short term debt, equity and preferred debt. Proper capital structure planning should strengthen the balance sheet, and increase the ability to face loss and change. Based on this strategy, review and analysis of the options presented, the approach of 50% preferred and 50% common stock is recommended. This approach maximizes Earnings Per Share, EPS, or shareholder return. The chart below details the results of using the Canadian Budgeted Earnings, moderate forecast, and calculating a 5 year average Earnings Before Interest and Tax, EBIT, of $112,581. By plugging $112,581 into the Capital Structure Analysis, we see the 50/50 approach maximizes EPS, as detailed in the chart below. The Alternative Capital Resources and EPS chart below presents each option and the expected EPS. For financing using only bonds, the EPS is .045, using 20% bonds EPS is .052,...
Words: 1822 - Pages: 8
...Features/advantages of WACC. 1. WACC accounts for tax shield benefit of interest in discount rate. 2. WACC is widely adopted by practitioners and is easy to use. 3. WACC is applicable when D/E remains essentially constant through project life. 4. WACC is most appropriate when the project is “typical” of the firms traditional businesses (i.e., same risk), or “scale enhancing”. • Features/advantages of APV. 1. APV accounts for tax shield benefit of interest in cash flows (not discount rate). 2. APV was introduced by academics and is slowly being adopted in practice. 3. 11% of firms always or almost always use it. • APV often requires/accomodates knowledge of a particular debt repayment schedule. • APV (as opposed to WACC) is suited for situations where the debt to equity ratio is changing significantly over time (capital intensive projects and LBOs). • APV can handle “side effects”: tax shield, issue costs, bankruptcy costs, etc. 3 Adjusted Present Value: Example • Suppose the firm is evaluating a project requiring a $10 million investment and offering an after-tax free cash flow of $1.8 million per year...
Words: 2208 - Pages: 9
...Question 1 1. Differences in operations ACTAVIS | DRL | * Selling, General and Administrative expensesThe SGA expenses have risen as a percentage of the Net Revenues of Actavis in 2012 by 55%. The number of employees have gone up from 6686 to 17700 (refer Employees sub-topic in Page 22 of 2011 and 2012 10K reports) through these acquisitions and this has significantly contributed to the increase in the Administrative expenses of the organization. | * Selling, General and Administrative expensesThough SGA expense has significantly risen in 2012 when compared to the rise in 2011, the amount spent on selling, general and administrative activities has steadily reduced in proportion to the net revenue of the organization each year.This increase was primarily on account of the following: * increased personnel costs, due to annual raises and new recruitments; * higher distribution costs, due to increases in sales volumes and freight cost increases; and * impact of depreciation of the Indian rupee against multiple currencies in the markets in which we operate.(Refer Pg 72 in 2012 20F Application) | * Research and DevelopmentActavis has more than doubled its investment in R&D within the organization over the years since 2009 (Pg 5). From 2011 alone Actavis’s internal investment has risen by 36%. Close to 7% of the Net revenue is maintained as R&D expense every year. | * Research and DevelopmentResearch and development expenses increased by 17% during...
Words: 6159 - Pages: 25
...Hoosier Castings Corporation | The Dynamics of Transitioning a Family Business | | TEAM 7 CLARK HAYS, NITHYA SUNDARAM & JADE CHEN TEAM 7 CLARK HAYS, NITHYA SUNDARAM & JADE CHEN 2/10/2014 2/10/2014 1. Burdens of Succession & Conflicts of Interest The major stakeholders for HCC are the DeWitt family members (David DeWitt 51%, Gregory DeWitt 15% and Mabel DeWitt 22%), Brendon Morris’s management team (Gregory DeWitt, Scott Rolston, Ryan Williams and Jennifer Nichols), the non-DeWitt family board members (Brendon Morris and Daniel Michaelson), as well as the HCC’s employees. Among them, only the three DeWitt family members, Michelson and Morris are the shareholders of HCC. HCC has a typical family ownership structure. The ownership and control is concentrated on the DeWitt family shareholders while currently David DeWitt serves as a chairman and consultant for the board, Gregory DeWitt is still on the top management team, and Mabel acts as an active participant in board meetings. According to Carl Magnus Bjuggren , Sven-Olov Daunfeldt and Dan Johansson’s “Highgrowth firms and family ownership” article, on the one hand, concentrated ownership gives the controlling shareholders incentives as well as ability to monitor the management. On the other hand, the combination of ownership and control means that families face opportunities to benefit themselves at the expense of other shareholders. History has also proven that this power concentration has helped...
Words: 3995 - Pages: 16
...Cash management is defined as” processes and techniques focused on the acceleration of receivables and the cash conversion cycle. Reduction of the cash conversion cycle, along with the related investment of surplus funds, should be a critical objective of financial managers” (Cleverley, Song & Cleverley). Good cash management is the key to a successful business. Cash management is especially crucial in the health care industry for several reasons. Large sums of investment eligible funds pertain to hospitals and other healthcare firms. Hospitals and other healthcare firms experience larger investment management needs than other industries for the following reasons: * Many healthcare firms are voluntary, not-for-profit firms and must set aside funds for replacement of plants and equipment. * Healthcare firms are increasingly beginning to self-insure all or a portion of their professional liability risk. * Many healthcare firms receive gifts and endowments. Although these sums may not be large for individual firms, they can provide additional sources of investment. * Many healthcare firms also have sizable funding requirements for defined-benefit pension plans and debt service requirements associated with the issuance of bonds. (Cleverley, Song & Cleverley). Cash management is tied together with the cash conversion cycle. This cycle “represents the time it takes a firm to go from an...
Words: 1216 - Pages: 5
...John Mathiowetz Re: Optimal Capital Structure Overview ______________________________________________________________________________ As result of the analyst meeting, the finance team and I evaluated whether or not we could increase shareholder value by changing the capital structure of Hill Country Snack Foods (HCSF). We analyzed four different scenarios: ● Maintain our current Debt-to-Capital position of 0% ● Expand our Debt-to-Capital to 20% ● Expand Debt-to-Capital even further, to 40% ● Significantly grow financial leverage, expanding Debt-to-Capital to 60% After reviewing these scenarios, we recommend HCSF amend the current Debt-to-Capital ratio...
Words: 1414 - Pages: 6
...flow from operations is cash collected from the sales of goods and services and from investments (e.g., interest and dividends), less cash spent for operating expenses. These include cash paid to suppliers, employees, interest, tax, and other miscellaneous operating expenses. The term operating cash flow is a net concept. Χ Cash flow from investing is cash spend on investments such as marketable securities, investments, PP&E, land, and patents, less cash received from the sales of these types of investments. The term investing cash flow is a net concept. In most cases, investing cash flow is negative. Χ Cash flow from financing is cash generated from the issuance of debt and the sale of stock, less cash spent for dividends, debt repayment, and the purchase of stock. Again, the term financing cash flow is a net concept. Χ In a sense, the objective of any business is to generate negative cash flows from financing, which represents the payback for equity and debt financiers. Any investment made in the company is done with the expectation that one day, the firm will be able to internally support substantial amounts of negative financing cash flows. Χ Non-cash transactions do not affect the cash flow statement. For example, if a firm acquires equipment through the issuance of a note payable, the increase in equipment does not represent an investing use of cash and the issuance of the note does not represent a financing source of cash. Χ The amount of gain or loss on...
Words: 3717 - Pages: 15
... 1. FINANCIAL AND ECONOMIC ESSENCE OF CASH 4 1.1 Definition and classification of cash flows 4 2. OPTIMIZATION OF CASH FLOWS ON THE EXAMPLE OF THE COMPANY LLP “BASHLAK TRANS EXPRESS ALMATY” 16 2.1 General characteristic of activity 16 2.2 Cash flow analysis of LLP "BASHLAK TRANS EXPRESS ALMATY" 17 3. OPTIMIZATION OF THE SYSTEM IMPROVEMENT OF CASHFLOW AT THE ENTERPRISE 25 CONCLUSION 29 REFERENCES 30 INTRODUCTION In a modern economic situation one of the most important conditions of a survival and development of the enterprise is existence and rational use of monetary funds. In such circumstances, one of the key problems of the financial analysis is to define and maintain an optimal size and structure of the invested capital in a monetary form in order to obtain the maximum amount of cash flow over a certain period and the rational organization of settlements. In the conditions of the competition and unstable environment it is necessary to react quickly to deviations from normal activity of the enterprise. Cash flow management is the tool with which you can achieve the desired results of the enterprise - profit. These circumstances determined the choice of research topic. The...
Words: 11703 - Pages: 47
...1.Abstract The balance sheet is necessary because it shows what the business has (assets) and what the business owes against those assets (liabilities). The difference between the assets and the liabilities shows the net worth of the business. The net worth of the business is important in that it is a measurement of the time the business is expected to stay in financial power. The balance sheet also provides the business with information on how best it is able to pay its debts. Underwriters also use the information in the balance sheet (working capital) to assess the business' ability to finance its operations. The balance sheet is necessary for the managers. It assists the managers of businesses in making decisions regarding purchasing of equipments for the business. Business managers depend on the balance sheet to analyze whether buying certain equipment on debt is the right move for the business at that time. Business managers need the balance sheet so as to decide the best source of credit for the business at that time. The balance sheet shows the accounting equation in a physical representation. The balance sheet also shows the owner's equity for example, it shows the value of the stock and the number of shares outstanding. The balance sheet is also used by the government agencies to make sure that the business is complying with the set laws. It also provides information to any potential lenders of the business on the credit worthiness of the business. When a group of...
Words: 10550 - Pages: 43
...Investment Banking Valuation, Leveraged Buyouts, and Mergers & Acquisitions JOSHUA ROSENBAUM JOSHUA PEARL FOREWORD BY JOSEPH R. PERELLA Investment Banking Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding. The Wiley Finance series contains books written specifically for finance and investment professionals as well as sophisticated individual investors and their financial advisors. Book topics range from portfolio management to e-commerce, risk management, financial engineering, valuation, and financial instrument analysis, as well as much more. For a list of available titles, please visit our Web site at www.WileyFinance.com. Investment Banking Valuation, Leveraged Buyouts, and Mergers & Acquisitions JOSHUA ROSENBAUM JOSHUA PEARL John Wiley & Sons, Inc. Copyright C 2009 by Joshua Rosenbaum and Joshua Pearl. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976...
Words: 138300 - Pages: 554
...Internship Report on Functions oF credit risk management in non Banking Financial institutions (nBFi) in Bangladesh A study on IDLC Finance Limited Internship Report on Functions oF credit risk management in non Banking Financial institutions (nBFi) in Bangladesh A study on IDLC Finance Limited Submitted to: Sharmin Shabnam Rahman Dewan Mostafizur Rahman Internship supervisor of the submitter BRAC Business School (BBS) BRAC University Submitted By: Chowdhury Tasmiah Jabeen ID-06104024 BRAC Business School (BBS) BRAC University Date of Submission: 23rd December 2009 Letter of Transmittal_______________________ 23rd December 2009 Sharmin Shabnam Rahman BRAC Business School (BBS) BRAC University Subject: Submission of Internship Report of BBA Programme Dear Madam, It is my great pleasure to submit the internship report on "Functions of Credit Risk management in Non Banking Financial Institutions (NBFI) in Bangladesh, A study on IDLC Finance Ltd " which is a part of BBA Programme to you for your consideration. I made sincere efforts to study related materials, documents, observe operations performed in IDLC Finance Limited and examine relevant records for preparation of the report. Within the time limit, I have tried my best to compile the pertinent information as comprehensively as possible and if you need any further information, I will be glad to assist you. Thanking you, Chowdhury Tasmiah Jabeen ID-06104024 BRAC Business School (BBS) BRAC...
Words: 14614 - Pages: 59
...Management of Working Capital Case Study: George’s Trains BUS650: Managerial Finance Stanley Atkinson Khrista Richards May 4, 2015 In this assignment I will be looking at the business that George started. He is coming to us for financial advice on his working capital practices. I will describe his working capital practices, including his methods of capital budgeting analysis techniques. Also I will analyze the potential pitfalls in his capital budgeting practices that George should be aware of. Then I will develop a simple statement of cash flows for George’s Trains using any information gleaned from the video. I will also look at what areas of improvement that I recommend. George started a model trains business with his sons. It started off as a hobby for him and grew from there into a business that does minor repairs for customers and hobby shops. George had no capital to invest in the business since he has worked for another company for so long. He only had a good relationship with his bank and was able to purchase the business from someone else and buy additional inventory. The bank found that they needed to make a capital investment in George’s Trains. The building for the shop was owned by someone who wanted to terminate the lease but George was able to buy the building for himself. He did not want to lose his customers that he had acquired while at this shop. To get this loan from the bank, George needed to make sure he was watching his spending in order to maintain...
Words: 971 - Pages: 4
