...time value of money Principle 3. Cash—Not Profits—is King Principle 4. Incremental cash flows Principle 5. The curse of competitive markets Principle 6. Efficient Markets Principle 7. The Agency Problem Principle 8. Taxes bias business decisions Principle 9. All risk is not equal Principle 10. Ethical dilemmas persistTen principles of finance are listed and explained in this ahort lecture. Principle 1. The risk-return trade-off Principle 2. The time value of money Principle 3. Cash—Not Profits—is King Principle 4. Incremental cash flows Principle 5. The curse of competitive markets Principle 6. Efficient Markets Principle 7. The Agency Problem Principle 8. Taxes bias business decisions Principle 9. All risk is not equal Principle 10. Ethical dilemmas persistTen principles of finance are listed and explained in this ahort lecture. Principle 1. The risk-return trade-off Principle 2. The time value of money Principle 3. Cash—Not Profits—is King Principle 4. Incremental cash flows Principle 5. The curse of competitive markets Principle 6. Efficient Markets Principle 7. The Agency Problem Principle 8. Taxes bias business decisions Principle 9. All risk is not equal Principle 10. Ethical dilemmas persistTen principles of finance are listed and explained in this ahort lecture. Principle 1. The risk-return trade-off Principle 2. The time value of money Principle 3. Cash—Not Profits—is King Principle 4. Incremental cash flows Principle 5. The curse of competitive...
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...years, Arthur King dreamed of owning his own business. One afternoon, he noticed a newspaper ad for the sale of a bookstore in Cannon Beach, Oregon: The ad provided a telephone number, so King called Mary Becker and arranged a meeting for the following week. When he arrived in Cannon Beach, King discovered a small store on a busy street in the heart of town. The building that housed the shop was an attractive older structure that had been remodeled and was in good repair. Inside, the fixtures were clean and well maintained, and the shelves were stocked with best-sellers, travel guides, cookbooks, "how-to" books, and the usual bookstore merchandise. Mary Becker had owned and operated the Haystack Bookstore for over 20 years. She showed King her accounting records disclosing the cost of inventories and the earnings of the bookstore for the past 5 years. She also indicated that Cannon Beach was growing more popular as a summer resort and as a year-round residence. King wanted to purchase the business but explained that he could only afford to pay $45,000 in cash. Becker was eager to sell, so she put King in touch with an individual who was willing to lend him the remaining $80,000. The loan would be secured by the land and building, bear a 10% interest rate, and require eight annual payments of $10,000 plus accrued interest. After some discussion, King agreed to these terms and signed a purchase agreement with Becker and a loan agreement with the lender. No cash was exchanged...
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...importance of cash flow management Week 3: Analysis January 28, 2015 eduardo ramirez January 28, 2015 eduardo ramirez Importance of Cash Flow 1. The per year cash flow short fall can be calculated as by formula Cash flow for any year = Latest year minus previous year And, cumulatively by adding up the shortfalls over the year and adjusting them accordingly Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 $10M $15M $10M $50M $15M $30M $21M 2. The different options that are available to make this project go are many to discuss. The cash flow predicting is a very imperative and valuable instrument for any type of business. In many illustrations related to small and medium enterprises, they encounter problems in business productions, as they are unable to bond day-to-day monetary gaps in dealings. This is a common scenario. Cash flow forecast occupies an important place amongst many financial reports prepared for businesses. When a daily cash flow forecast is prepared, the customs from which cash comes in and goes out are obviously shown on regular center in the specific month. This sympathetic is very ample for a manufacturer to take decisions. It is indispensable to smear the knowledge and the experience of previous months to make daily cash flow statement. Likelihood of getting the number of returned cheques minimized is a singular advantage of cash flow forecast request. Scheduled expenses can be prearranged rendering to the cash influx...
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...Executive Summary “5 King Noodles” restaurant is the new innovative noodle restaurant in the market that totally differs from the other restaurants. “5 King Noodles” will mainly emphasize on unique and variety of noodles with the fresh and high quality. Our home-made 5 kinds of soup are naturally made from turmeric, pandanus leaf, butterfly pea, roselle, and lotus root with the nice different colors will be customize served with our natural home-made noodles. This could be the source of 5 King Noodles name. Consequently, our restaurant provides a various styles of soup with the natural home-made noodles in order to meet the customer’s needs and wants. For more reason, most of the people in Thailand increasingly concern on their health due to the obesity rate in Thailand keeps increasing every year. Our restaurant will be located in Siam soi 3 next to the “Digital Gateway”, one of the famous shopping and tutoring areas in Thailand. We select this location because as Siam area is well-known and many people love visiting there, especially teenagers and businessmen. So, if our restaurant could run the business there, we would have the large target customers since the teenagers always search for the nice restaurant with the cool dishes. If our first branch is going well, we would expand more branches in the nearer future through the famous department stores such as Central, The Mall, Terminal 21, and etc. “5 King Noodles” will also provide the very special dishes for who love...
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...Name Course Date Franchising with Burger King Burger King franchising operations started in 1954 basing its market on the success of signature Whopper hamburger. Success was imminent as years later the fast food empire had more than 12,000 burger franchises in United States and other foreign countries. Modern lifestyles and mobility of the business continuously allow fast-food restaurants to enhance its growth due the growing number of new clientele. The positive market prospects make the quick-service restaurants a successful franchising business. Burger King Corporation encourages standardization of the quality and standards of products offered in franchises. Burger King also entices their franchisees with ways of financial operations, training in store management and the preferable storage facilities. However, franchising could be a new or an existing one. As for a new franchise, the applicant has to meet certain set standards to qualify as a franchisee of the Burger King Corporation. Organizing financial information is the first step as a new applicant. This is a requirement in order to qualify as a franchise or for a bank loan if necessary. As at 2012, a potential franchisee was required to have a minimum of $500,000 in liquid assets and a net worth of $1.5 million to qualify as a potential applicant. After that, the applicant has to research on lenders suitable to supply the food commodities at a cost effective franchise loan. The lenders considered are to provide...
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...Cash Budget Problem The owner of Lazy Inn has been requested by First National Bank to submit a cash budget for the next calendar year. With that in mind, please prepare the following: a 12-month projected cash budget statement for 2012 (assume that your beginning cash (Jan 1) is $16,500). After preparing the above schedule, can you provide the owner with some guidance as to whether: to raise Lazy Inn’s summer (June-Aug) rates by 10% across the board. The owner’s guess is that occupancy would go down by 5 percentage points if the rates were raised. What would the impact on cumulative borrowing be if these rates did change? (use scenario manager) Cash Inflows | | |Jan-Mar & Dec. |Apr-May Price/Occupancy|June-Aug Price/Occupancy |Sept.-Nov. Price/Occupancy | | | |Price/Occupancy Rate |Rate |Rate |Rate | |Room |Qty | | | | | |1 king size bed/room |10 |$58 / 85% |$40 / 50% |$58 / 75% |$45 / 55% | |2 king size beds/room |60 |$70 / 80% |$48 / 55% |$70 / 80% |$50 / 58% | |2...
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...1- Discuss the reasons that a manufacturing company like Cloudveil might experience this type of cash flow problem. Is this a sign or poor management or is the nature of the business? Inadequate cash flow is a symptom of a management problem in a business. Poor cash flow management is known to have placed an end to even successful large businesses. There's an old adage about business that "cash is king" and, if that's so, then cash flow is the blood that keeps the heart of the kingdom pumping. Cash flow is one of the most critical components of success for a small or mid-sized business. Without cash, profits are meaningless. Many a profitable business on paper has ended up in bankruptcy because the amount of cash coming in doesn't compare with the amount of cash going out. Reasons of cash flow problem * Allowing customers too much credit: Allowing customers too much credit can put a company in a vulnerable position as you keep outlaying costs to complete the work yet are not getting any income to fund new or existing orders. * Slow paying Accounts: As mentioned above with allowing customers too much credit, the same thing can be said for slow paying customers. If you are doing a job for a customer then waiting 30-60 + days for the invoice to be paid plus new orders are continuing to come in, you may find yourself in a cash flow crunch. * Sudden or rapid growth: This is a big one, rapid growth sounds like a positive direction to be going in but It is if you...
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...retail business on 1 February 2014, supplying two grades of truck tyres for a specific truck model. They are Standard TT and Premium TT, and TT stands for Truck Tyres. As most of his customers are truck companies, Tom is not required to provide delivery services. Therefore, he did not have to invest in motor vehicles. Instead, he invested in equipment for loading and unloading tyres by paying $10,000 cash on the day of commencement of business. Tom sees great potential in this business and endeavours to maintain double entry accounting records. It has been two months since the start of business and now, he has engaged your service as an accountant to develop the double entry recording system. As there are small expenses paid directly by Tom, you recommended a Petty Cash Advance be established and a Petty Cash Book maintained. The trial balance below shows the summary of transactions in the first two months of business, now carried forward to the 1st of April 2014. CHOICE TRUCK TYRES TRIAL BALANCE AS AT 1 APRIL 2014 ACCOUNT Cash at bank Accounts Receivable Equipment (paid cash on 1 February 2014) Accounts Payable Loan from BankOnUs Ltd Capital – Tom Blakeney Drawings – Tom Blakeney (Equity) Sales Purchases Electricity Equipment Running Costs Insurance - Equipment Interest Office Supplies Rent Telephone Wages TOTAL DEBIT $ 15,320 46,500 10,000 25,000 41,670 20,000 5,000 66,000 65,000 1,500 200 300 1,000 150 6,000 200 1,500 152,670 152,670 CREDIT $ Page | 1 Information...
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...Classification 3 Figure 2: Accounting for Travel Companies 7 Figure 3: Management Information for Decision Making 9 Figure 4: Financial Accounts 10 Figure 5: Sources of Finance 12 Introduction Management decision making is a crucial part for not only regular companies but even for travel and tourism companies. The report here thus highlights and discusses different financial practices as observed and applied at the micro level, i.e. specifically in the travel and tourism industry. The company that has been chosen for analysis and reference study here, is Cox and Kings. Cox and Kings is one of the longest established travel companies around the world. Founded in 1758, the company is headquartered in India and has offices in multiple countries including UK, USA, Singapore and Dubai. Destination management, trade fairs, foreign exchange and business travel are some of the key services offered by the company (Cox & Kings, 2014). LO1. Understand the importance of cost, volume and profit for management decision making in the travel and tourism 1.1 Importance of Cost and Volume Costs are the...
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...retail business on 1 February 2014, supplying two grades of truck tyres for a specific truck model. They are Standard TT and Premium TT, and TT stands for Truck Tyres. As most of his customers are truck companies, Tom is not required to provide delivery services. Therefore, he did not have to invest in motor vehicles. Instead, he invested in equipment for loading and unloading tyres by paying $10,000 cash on the day of commencement of business. Tom sees great potential in this business and endeavours to maintain double entry accounting records. It has been two months since the start of business and now, he has engaged your service as an accountant to develop the double entry recording system. As there are small expenses paid directly by Tom, you recommended a Petty Cash Advance be established and a Petty Cash Book maintained. The trial balance below shows the summary of transactions in the first two months of business, now carried forward to the 1st of April 2014. CHOICE TRUCK TYRES TRIAL BALANCE AS AT 1 APRIL 2014 ACCOUNT Cash at bank Accounts Receivable Equipment (paid cash on 1 February 2014) Accounts Payable Loan from BankOnUs Ltd Capital – Tom Blakeney Drawings – Tom Blakeney (Equity) Sales Purchases Electricity Equipment Running Costs Insurance - Equipment Interest Office Supplies Rent Telephone Wages TOTAL DEBIT $ 15,320 46,500 10,000 25,000 41,670 20,000 5,000 66,000 65,000 1,500 200 300 1,000 150 6,000 200 1,500 152,670 152,670 CREDIT $ Page | 1 Information...
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...Deal of the Week: Burger King to buy Canada's Tim Hortons for $11.5B Announcement Date Acquirer Acquirer Description August 26, 2014 Burger King Worldwide (NYSE: BKW) Operates and franchises fast food hamburger restaurants under the Burger King brand name. Approximately 14,000 locations worldwide Founded in 1954 and headquartered in Miami, Florida Mkt Cap: $11.3 billion LTM EBITDA: $672.1 million EV: $13.4 billion LTM EV / Revenue: 12.9x LTM Revenue: $1.0 billion LTM EV / EBITDA: 19.9x Tim Hortons (TO: THI.TO) Develops and franchises quick service restaurants primarily in Canada and the United States. As of June 29, 2014, the company had 3,630 locations in Canada and 866 in the United States Founded in 1964 and headquartered in Oakville, Canada Mkt Cap: $10.7 billion LTM EBITDA: $758.1 million EV: $12.0 billion LTM EV / Revenue: 3.9x LTM Revenue: $3.1 billion LTM EV / EBITDA: 15.8x Price: $11.5 billion Consideration: Cash & Stock JP Morgan and Wells Fargo In announcing their $11.5 billion merger, Burger King and Tim Hortons declared their intentions to become a truly global fast‐food empire whose offerings span from breakfast to dinner Under the terms of the deal, Burger King will pay 65.50 Canadian dollars in cash and 0.8025 of one of its shares for each Tim Hortons share. That amounts to $85.78 a share, based on Burger King’s closing price on Monday The combined company will be based in Canada...
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...wsj.com/articles/burger-king-returns-to-its-roots-1457519402?mod=djem_jiewr_MK_domainid "Burger King Returns to Its Roots", Jargon, March 9 1. In your own words, describe the principle challenge that Burger King is trying to address. Burger King over the years has been struggling in the market, because of an over complicated menu. They changed from what started them out with success to try to target another market, but I feel they realized why change to another market when they were already successful to begin with. 2. Summarize the differences between fast food and fast-casual in terms of their menus, pricing, eating experiences, and patrons. Prices usually are higher in fast-casual, but the food is usually considered healthier. Sometimes it is made in front of you or it is made fresh at the restaurant. Sometimes fast casual is basically like a diner where you can sit down and eat with actual plate. An example would be buffalo wild wings, or panda express. 3. Describe at least 3 business implications that occur when a fast food chain alters its menu. Advertising more nutritious items tends to target more consumers. Getting rid of children’s menu to not false advertise how healthy a meal is which is a more business based decision. McDonald’s having a dollar drink would increase sales due to a high demand. http://www.wsj.com/articles/find-the-missing-cash-register-1457472672?mod=djem_jiewr_BU_domainid "Find the Missing Cash Register", Smith, March 8 ...
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...borrow to finance his expected expansion in sales (assume a 1991 sales volume of $3.6 million)? 3. As Mr. Butler’s financial advisor, would you urge him to go ahead with, or to reconsider, his anticipated expansion and his plans for additional debt financing? As the banker, would you approve Mr. Butler’s loan request, and, if so, what conditions would you put on the loan? 4. Has Butler Lumber Company created value for shareholders? Hint: It might help you to analyze the case if you conduct the following analyses: 1. 2. 3. 4. Construct a common-size (percentage) income statement. Construct a common-size (percentage) B/S Using information from 1&2 to find out the operating efficiency Assuming the same operating efficiency in 1990, forecast cash needs for the target growth Case #2: Ocean Carriers Questions Ocean Carriers uses a 9% discount rate. 1. Do you expect daily spot hire rates to increase or decrease next year? 2. What factors drive daily hire rates? 3. How would you characterize the long-term prospects of the capesize dry bulk industry? 4. Should Ms Linn purchase the $39M capesize? Make 2 different assumptions. First, assume that Ocean Carriers in a U.S. firm subject to 35% taxation. Second, assume that Ocean Carriers is located in Hong Kong, where owners of Hong Kong ships are not required to pay any tax on profits made overseas and are also exempt from paying any tax on profit made on cargo uplifted from Hong Kong. 5. What do you think of the company’s policy of not...
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...on the door people and things began moving in the apartment. The believe that drug-related evidence was about to be destroyed so they kicked in the door. There were three people in the apartment Hollis King, his girlfriend, and a guest. There was marijuana and powder cocaine in plain view. Crack cocaine, cash,...
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...borrow to finance his expected expansion in sales (assume a 1991 sales volume of $3.6 million)? 3. As Mr. Butler’s financial advisor, would you urge him to go ahead with, or to reconsider, his anticipated expansion and his plans for additional debt financing? As the banker, would you approve Mr. Butler’s loan request, and, if so, what conditions would you put on the loan? 4. Has Butler Lumber Company created value for shareholders? Hint: It might help you to analyze the case if you conduct the following analyses: 1. 2. 3. 4. Construct a common-size (percentage) income statement. Construct a common-size (percentage) B/S Using information from 1&2 to find out the operating efficiency Assuming the same operating efficiency in 1990, forecast cash needs for the target growth Case #B: Ocean Carriers Questions Ocean Carriers uses a 9% discount rate. 1. Do you expect daily spot hire rates to increase or decrease next year? 2. What factors drive daily hire rates? 3. How would you characterize the long-term prospects of the capesize dry bulk industry? 4. Should Ms Linn purchase the $39M capesize? Make 2 different assumptions. First, assume that Ocean Carriers in a U.S. firm subject to 35% taxation. Second, assume that Ocean Carriers is located in Hong Kong, where owners of Hong Kong ships are not required to pay any tax on profits made overseas and are also exempt from paying any tax on profit made on cargo uplifted from Hong Kong. 5. What do you think of the company’s policy of not...
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