...assets, long term debt, shareholders equity and retained earnings Difficulty: Medium Learning Objective: 01-01 Ross - Chapter 01 #1 2. In terms of the balance sheet model of the firm, the value of the firm in financial markets is equal to: A. tangible fixed assets plus intangible fixed assets. B. sales minus costs. C. cash inflow minus cash outflow. D. the value of the debt plus the value of the equity. E. the value of the debt minus the value of the equity. Difficulty: Easy Learning Objective: 01-01 Ross - Chapter 01 #2 3. Inventory is a component of: A. current assets. B. current liabilities. C. equity. D. fixed assets. Difficulty: Easy Learning Objective: 01-01 Ross - Chapter 01 #3 4. Using the balance sheet model of the firm, finance may be thought of as analysis of three primary subject areas. Which of the following groups correctly lists these three areas? A. Capital budgeting, capital structure, net working capital. B. Capital budgeting, capital structure, security marketing. C. Capital budgeting, net working capital, tax analysis. D. Capital budgeting, tax analysis, security marketing. E. Net working capital, tax analysis, security marketing. Difficulty: Easy Learning Objective: 01-01 Ross - Chapter 01 #4 5. Which of the following is not considered one of the basic questions of corporate finance? A....
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...Financial forecasts As part of your plan you will need to provide a set of financial projections which translate what you've said about your business into numbers. You will need to look carefully at: how much capital you need if you are seeking external funding the security you can offer lenders how you plan to repay any borrowings sources of revenue and income You may also want to include your personal finances as part of the plan at this stage. 1 Financial planning Your forecasts should run for the next three (or even five) years and their level of sophistication should reflect the sophistication of your business. However, the first 12 months' forecasts should have the most detail associated with them. Include the assumptions behind your projection with your figures, both in terms of costs and revenues so investors can clearly see the thinking behind the numbers. 2 What your forecasts should include Break even analysis Profit and loss forecast - a statement of the trading position of the business: the level of profit you expect to make, given your projected sales and the costs of providing goods and services and your overheads. Cashflow statements - your cash balance and monthly cashflow patterns for at least the first 12 to 18 months. The aim is to show that your business will have enough working capital to survive so make sure you have considered the key factors such as the...
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...PLEKHANOV RUSSIAN UNIVERSITY OF ECONOMICS INTERNATIONAL BUSINESS SCHOOL COURSE WORK « Business Valuation on the basis of Damodaran model » Corporate Finance Student: Pavel Terefera Supervisor: Irina Sokolnikova Moscow 2015 Contents Introduction _____________________________________________ 3 Chapter 1. Valuation______________________________________ 4 1.1 Valuation in portfolio management_________________________ 7 1.2 Valuation in acquisition__________________________________ 10 1.3 Valuation in corporate finance_____________________________ 10 Chapter 2. Approaches to Valuation___________________________ 11 2.1 Profitable Approach_____________________________________ 12 2.1.2 Income capitalization approach __________________________ 12 2.1.3Method of discounted cash flows__________________________ 14 2.1.4 Discounted Cash Flow Valuation on example of JSC NLMK____ 20 2.2 Relative Valuation Approach______________________________ 23 Conclusion _______________________________________________ 28 Bibliography ______________________________________________ 29 Introduction. Knowing the value of an asset may not be a guarantee for success for investor, but it does help us make more informed judgments. A postulate of sound investing is that an investor does not pay more for an asset than its worth. In conditions of market economy when all transactions are made "on fear and risk" their participants, both seller...
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...EFB201 Financial Markets Learning Guide EFB201 Learning Guide 1 Workload Expectations The unit has a two-‐hour lecture with a one-‐hour workshop/tutorial each week. QUT Guidelines are that “Eight to 10 hours per unit per week should be spent outside the classroom reading and working on assignments and tutorial tasks.” This unit covers a large amount of material commensurate with the workload expectations described above. The lectures are an integral part of the course materials and will contain spoken or written material that is additional to that in the textbook and set readings. Conversely, not all the set textbook or other readings will be covered in the lectures. In addition, you will be expected to do your own research in respect of particular topics, and this also forms part of the unit materials. All unit material is assessable; in other words, it is not possible to identify...
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...Assignment 1 – Sources of Finance 1. What are the gearing implications of (i) equity and (ii) loan financing for the current and future shareholders? Raven Construction PLC has Share Capital of £400,000 and total long-term debts of £800,000 giving it a debt to equity ratio of 2:1. Therefore, Raven Construction PLC is said to be Highly Geared as it currently has £2 of debt for every £1 of equity. This is calculated from the following equation: Long-term DebtCurrent Equity =Gearing Ratio i. Equity Financing – This is the process of raising capital through the sales of shares and refers to an ownership in Raven PLC. The purchase of shares is a simple way of introducing permanent capital into the company. The introduction of new shares will reduce the gearing ratio in Raven PLC and will give the company a greater amount of equity available to cover its long-term debts. ii. Loan Financing – This is a process of raising capital through the borrowing of equity from a third party that does not benefit from ownership of the company. The third party will loan an amount of cash over an agreed period and require payments, with interest, to be repaid over the life of the loan. This will give Raven PLC even more debt than equity. An increase in the amount of long-term debt will increase the gearing ratio further 2. Make clear recommendations to the company on how to finance their expansion? Raven Construction PLC now requires £1.2m for its current planned expansion...
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...GOLDCORP FINANCIAL ANALYSIS & INVESTMENT RECOMMENDATION COMPANY OVERVIEW Goldcorp is a leading mineral resource company engaging in the operation, exploration and acquisition of precious metals in regions across North and South America. The company has continued to focus primarily on the gold, silver, copper, lead & zinc. Goldcorp’s shares are jointly listed on the Toronto Stock Exchange (TSX) and New- York Stock Exchange (NYSE). Operations: As at December 2013, Goldcorp’s principal producing mining properties are located in Red Lake, Porcupine and Musselwhite gold mines in Canada; the Peñasquito gold/silver/lead/zinc mine and the Los Filos and El Sauzal gold mines in Mexico; the Marlin gold/silver mine in Guatemala; the Alumbrera gold/copper mine (37.5% interest) in Argentina; the Wharf gold mine in the US; and the Pueblo Viejo gold/silver/copper mine in the Dominican Republic (40% interest). The Company's 66.7% interest in the Marigold mine in the US was reclassified as a discontinued operation at December 31, 2013. INDUSTRY OUTLOOK Goldcorp operates in the Metals and Mining industry which involves the extraction and sale of minerals such as gold, silver, iron, copper, zinc and other precious metals. The industry is largely dominated by large multinational miners due to huge entry barrier created by the capital intensiveness of the business. The companies that operate in this industry are highly leveraged operationally and enjoy a significant advantage due to economies...
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...Daz Ware Gaz Price Justine Williams Managing Financial Principles and Techniques Assignment 1 1. Explain what documents and statements you have consulted. The Group Income Statement (P&L) and the Group Balance sheet were consulted. The following information was extracted. A companies profit and loss account shows revenue, expenditure and the profit or loss resulting in operations for a given financial year. Item 2012 £ M 2011 £M Sales (Revenue) 64539 60455 Cost of Sales (59278) (55330) Gross Profit 5261 5125 Overheads Expenses (1652) (1640) Property 376 432 Net Profit 3985 3917 Balance Sheet for Tescos – A financial statement showing measures of the assets, liability and owners equity or net worth of a business firm or non-profit organization as of a specific moment in time. 2012 £ M 2011 £ M Fixed Assets 37918 35167 Current Assets Adjusted for stock 12353 11608 Current Liabilities (19180) (17731) Net Assets 31091 29044 2. Use relevant ratios to measure the performance of the target company. Explain why you have used these measures and what the results mean in terms of strengths and weaknesses. Ratios 2012 2011 Current Ratio: Current Assets 12353 11608 Current Liabilities 19180 17731 = 0.64 : 1 = 0.65 : 1 The current ratio should be 1:1 in an ideal world but it is acceptable to be lower for a cash rich company. This shows that the current ratio is marginally...
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...: MANAGEMENT ACCOUNTING 1. Financial statements are used to show the (financial) performance of the company and also used as proof of company performance when sourcing for finance from banks, sourcing for finance /funds from (potential) investors. The financial statements are also used for legal compliance dictated from Government financial regulations and standards particularly for Public Limited Companies. Internally within the company, financial statements can be used for control and tracking resources by senior management, shareholders etc. 2. When a company’s assets increases for one period to the next, the liabilities and equity will also increase by the same amount. Also total assets must equal total equity and liabilities because for a business to acquire assets, it must raise the funds from somewhere. As a result, changes that happen in the assets must be compensated elsewhere. 3. No. The capital base for the companies might be different. By just looking at the profits, it does not show how much the companies are financing themselves and also profits does not show the cash flows of the company, i.e. whether the company is really performing well. Also, profits does not show the asset structure and equity performance e.g. earnings per share, dividends per share etc which is also very crucial for investment or financial performance analysis. 4. Other ways of comparing company performance is by using financial ratios and by looking at the index...
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...Subject CT1 Financial Mathematics Core Technical Syllabus for the 2013 Examinations 1 June 2012 Institute and Faculty of Actuaries Subject CT1 – Financial Mathematics Core Technical Aim The aim of the Financial Mathematics subject is to provide a grounding in financial mathematics and its simple applications. Links to other subjects Subject CT2 – Finance and Financial Reporting: develops the use of the asset types introduced in this subject. Subject CT4 – Models: develops the idea of stochastic interest rates. Subject CT5 – Contingencies: develops some of the techniques introduced in this subject in situations where cashflows are dependent on survival. Subject CT7 – Business Economics: develops the behaviour of interest rates. Subject CT8 – Financial Economics: develops the principles further. Subjects CA1 – Actuarial Risk Management, CA2 – Model Documentation, Analysis and Reporting and the Specialist Technical and Specialist Applications subjects: use the principles introduced in this subject. Objectives On completion of the subject the trainee actuary will be able to: (i) Describe how to use a generalised cashflow model to describe financial transactions. 1. For a given cashflow process, state the inflows and outflows in each future time period and discuss whether the amount or the timing (or both) is fixed or uncertain. Describe in the form of a cashflow model the operation of a zero coupon bond, a fixed interest security, an index-linked security, cash on deposit...
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...Short Analysis of Practical Difficulties of the NPV-method The Net Present Value (NPV) is a method to compare the value of an investment now and that amount in the future, taking into account the cost of capital and the cash flows generated by the investment. The formula to calculate the NPV is as follows: With t as the time of cashflow, i the discount rate and R the net cashflows. Although the formula to calculate the NPV is straightforward and takes into account the value of a cashflow (money) over time, there still is a lot of information that is up to discussion, to which numbers to use. The short comic below gives an idea: One of the umbers that is most easy to calculate is the investment, which is not more than a number. However, from that moment on all are just assumptions. An assumption of the future cash flows that will be generated and the discount rate of cost of capital. Let me use the example of the initial public offering of Twitter, for which the Financial Times has made a simplistic tool to calculate the market value of the company (http://www.ft.com/intl/cms/s/2/8ae5045c-4159-11e3-b064-00144feabdc0.html#axzz2lynPs27Z). Now, this short analysis does not have the goal to critique the tool, I merely use it to show what a different cost of capital can do with the ‘’market value of the company’’. A cost of capital of 10% will give an enterprise value of 23.1 billion dollar, while a cost of capital of 12% will give an enterprise value of 15.4 billion...
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...EFB 360 Finance Capstone Case Study 2 Distribution to shareholder: Dividends and Repurchase The case of Gainesboro Machine Tool Corporation Abstract 1 Introduction 1 Dividend Irrelevance Proposition 1 Financial Flexibility 2 Agency Theory 2 Signalling Theory 3 Clientele Effects 4 The Optimal Payout Ratio 5 Share Repurchase 7 Conclusion 8 References 10 Appendices 13 Appendix 1: Detailed Calculation of Unused Debt Capacity (0%, 20%, 40% and residual payout) 13 Appendix 2: Residual Payout Calculations 15 Appendix 3: Sensitivity Analysis for Optimal Payout Ratio 16 Appendix 3.1 Debt/ Equity Ratio of 13% and 18% Annual Sales Growth 17 Abstract This paper reviews current literature to explore the financial effects of payout policy on signalling and clientele effects, as well as the financial implications of dividend and share repurchase decisions. Possible reactions that Gainesboro’s various capital providers may have to different payout policies are also examined, to determine an optimal payout policy for Gainesboro, taking into account contextual factors mentioned in the case. Findings suggest that although a 20% payout ratio is feasible, Gainesboro will most benefit from share repurchasing this quarter. Introduction Gainesboro Machine Tool Corporation has a tradition of strong earnings and predictable growth. However since 2000, dividends have started to outgrow earnings. By the first half of 2005, they have not declared dividends yet but...
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...The balance sheet shows the financial position of an organisation at a given point in time. The balance sheet consists of assets, liabilities and equity. An asset is something that is controlled by the organisation that will generate future economic benefits. A liability is an obligation to transfer economic benefits always from the business to third parties other than the owners of the business such as suppliers or for loans. Equity is the relationship between the shareholders, who are the owners of the business, and the business and show as a special liability. Relevance: This requires that the figures are meaningful and useful. Objectivity (Reliability): This requires that the information is objective and can be trusted. Feasibility: This means that the information can be collected easily and economically. Duality The duality concept is closely related to the system of double entry book-keeping used for recording the financial information upon which the financial statements are based. Because the duality concept requires the clear identification of both the assets of a business and the claims of different parties on those assets in the balance sheet, it is consistent with the criteria of relevance to users of accounting information. The duality concept also provides a “check” (through the balancing requirement) on the reliability of data provided in the main financial statements. It is therefore broadly consistent with the three criteria of relevance, objectivity and feasibility...
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...Financial & Accounting Function Teams and Responsibilities 1. Operations Reporting Team .Internal customer BU/departments to serve - Operations & Training, Stores . Key Responsibilities a. Restaurant Accounting/invoice processing- Cash & Sales, Accounts Payable, Real Estate & Construction (Fixed Assets), Food & Paper and inventory, Crew Payroll/MPF and G&A expenses b. Daily/Weekly sales and key KPI decentralized reporting and monitoring c. Monthly Closing and Store P&L, Balance Sheet and Cashflow Reporting and Review d. Monthly Restaurant Consulting-P&L Profitability opportunities and follow up action plans 2. Planning and Analysis Team .Internal customer BU/departments to serve - Real Estate & Construction, Marketing, Human Resources, Supply Chain, IT . Key Responsibilities a. Provide financial vision, insight and strategy, and lead annual business planning and budgeting process b. Monthly rolling forecasting (income projection) c. Quarterly business review and monthly financial commentary & presentation d. Provide key decision support via Pre and Post analysis of :- Capital Expenditure/Lease (new store development and re-imaging, IT), Marketing promotion programs and new menu items HR Benefits (including new bonus scheme) Menu price adjustment Food Suppliers contracts New Business projects (eg Food Delivery, Dessert Kiosks) e. Ongoing development and upgrade of financial...
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...Authors: Philip Larson Kennecott Copper Corporation I prepared my answers by myself before discussing the case with anyone else. I only consulted other members of this class and this work is my own. 1) Why did Kennecott buy Peabody? Was the acquisition successful in achieving its goals? Does the experience with Peabody have any bearing on the Carborundum acquisition? Kennecott purchased Peabody for two primary reasons, 1) to moderate the wide swings in Kennecott’s profitability created by sharp changes in copper prices and sales, and 2) to provide Kennecott with significant future investment opportunities outside the copper industry. The acquisition was not successful in achieving these goals. Kennecott’s profits in the years following the acquisition were more erratic than they had been prior to the acquisition, partially due to Peabody’s unexpectedly poor earnings. In particular, rather than using Peabody to smooth out profits, Kennecott contributed $532M to Peapody’s capital and allowed it to keep all of its net income. Moreover, the Peapody acquisition did not help Kennecott achieve its second goal of providing future investment opportunities outside the copper industry. Kennecott was forced to divest the acquisition just 6 years after the acquisition took place, removing any long-term investment prospects owning Peapody might provide. Therefore, the Peapody acquisition was not successful in achieving...
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...Objective Questions and Answers of Financial Management 1. State whether each of the following statements is True (T) or False(F) (i) Financial statements are an important source of information to shareholders and stakeholders. (ii) Both the BS and the IS shows the financial position of fen at the end of the year. (ii) BS of a company must be prepared in the horizontal format only. (iv) Preparation of Profit & Loss Appropriation A/c is a requirement under the Companies Act, 1956. (v) Ratio Analysis is the only technique of analysis of financial statements. (vi) Methodical presentation of financial statements helps in Nation of various ratios. (vii) In Common Size Statements, each item is expressed as a percentage of some common items (total). (viii) Trend Percentage Analysis helps in Dynamic Analysis. (ix) Liquidity Ratios help in analysing the cash position of the firm. (x) In calculation of Acid Test Ratio, Inventory is included in current assets. (xi) Working Capital Turnover Ratio may be classified as an Activity Ratio. (xii) Debt-Equity Ratio is a measure of long-term solvency of a firm. (xiii) GP Ratio and NP Ratio give the profitability of the firm from the point of view of the shareholders. (xiv) Return on Equity and Earnings per Share are one and the same thing. (xv) DU PONT Analysis looks into the elements of profits. (xvi) Ratio Analysis provides the solution to the financial problems. Answers: (i) T, (ii) F, (iii) F, (iv) F, (v) F, (vi) T, (vii)...
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