...regarding the 2 credit proposals? Why? Ashar Corporation: First of all, I am going to discuss the Ashar Business Credit Proposal. In this proposal, Ashar Industries Company, which is one of the largest steel companies worldwide, is asking for a $850 M credit in order to finance their acquisition of Zellmont SA, which would actually create the largest steel producer company of the world. This acquisition has not been recommended by the Zellmont board, and therefore it could be regarded as a hostile takeover at the moment. As it is seen on its financial statements, Ashar corporation has been a very healthy corporation during the past few years. We can see that they have a really stable Income Statement, with high figures regarding their revenues, EBIT, Net Income. Even though, there is a decrease of the figures from 2004 to 2005, if we check in the Balance Sheet, it can be justified by the acquisition of fixed assets and long-term debt and equity. This can be a worrying figure since the company has already long-term debt, but if we look out of the box, we should know that steel companies, in order to grow and maximize their profit, they need to acquire a lot of fixed costs, which will be the base for their operations. It can be a bit risky because if the value of the steel goes down, then the debt to asset ratio will increase. Although all these possible outcomes, and looking forward in the future of the steel industry, it is not really probable that the price of the steel will...
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...Bug-Off Exterminators provides pest control services and sells extermination products manufactured by other companies. The following six-column table contains the company’s unadjusted trial balance as of December 31, 2011. [pic] .:. The following information in a through h applies to the company at the end of the current year. a. The bank reconciliation as of December 31, 2011, includes the following facts. Cash balance per bank . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,100 Cash balance per books . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 Outstanding checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800 Deposit in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,450 Interest earned (on bank account) . . . . . . . . . . . . . . . . . . 52 Bank service charges (miscellaneous expense) . . . . . . . . 15 Reported on the bank statement is a canceled check that the company failed to record. (Information from the bank reconciliation allows you to determine the amount of this check, which is a payment on an account payable.) b. An examination of customers’ accounts shows that accounts totaling $679 should be written off as uncollectible. Using an aging of receivables, the company determines that the ending balance of the Allowance for Doubtful Accounts should be $700. c. A truck is purchased and placed in service on January 1, 2011. Its cost is being depreciated with the straight-line method using the...
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...• Case AP6-2: American Eagle Outfitters, Inc. American Eagle Outfitters, Inc. AP6-2 Financial information for American Eagle is presented in Appendix A at the end of the book. Required: 1. In the summary of significant accounting policies, what is American Eagle's procedure in accounting for inventory? pA-12 AE evaluates merchandise inventory at the lower of average cost or market, utilizing retail method. Average cost includes merchandise design and sourcing costs and related expenses. AE records merchandise receipts at the time merchandise is delivered to the foreign shipping port by the manufacturer; at this point the title and risk of loss is transferred to the company. 2. For the most recent year, what is the amount of inventory in the balance sheet? What does this amount represent? Merchandise inventory Jan 30, 2010 - $326,454. This amount represents a current asset which reports the cost of goods purchased to be resold, which have not yet been sold as of January 30, 2010. 3. American Eagle refers to its cost of goods sold using a different name. What is it? Cost of sales, including certain buying, occupancy and warehousing expenses. 4. For the most recent year, what is the amount of cost of goods sold in the income statement? What does this amount represent? Cost of goods sold – $1,832,471. This amount represents the cost of the merchandise that was sold to customers and includes the cost from its supplier plus any additional costs...
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...Horizontal technique will be used; and comparing it with results of company’s biggest competitor. Vertical Analysis technique will be used as a standard way for comparison. Then to see how company does in comparison to the competition, we will use Ratio Analysis in which biggest competitor’s numbers will be reviewed. It is important to have several different analyses to see the entire picture and later to be able to understand where company is and what actions shall be chosen for the improvement of financial situation. a. Review the horizontal analysis, analyze the results, and discuss operational areas of concern. First we will use Horizontal Analysis, which is a study of percentage changes in comparative financial statements to look at revenue, selling and operating expenses, income, earnings, assets, liabilities and equity. The reason this method is important is because we can see how company does percentage wise. It gives us better understanding of success then just numbers along. We will be comparing 3 years: year to year in different periods: 8(current), 7 (middle) and the year prior, we will be...
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...Go For Net Revenue The accounting issue at hand in this case is revenue. Landline is offering call routing services for PRU and the former entity has to make some receipts from the services rendered. To put the issue at hand in context, revenue is generally the income received by any company from selling goods or services. In abroad sense, revenue is the income received by any commercial institution for the goods sold or services rendered. It is basically the incoming receipts generated from the services offered or goods sold. It is the core parameter of consideration in the event of evaluating the company’s health. There are two classifications of revenue and the situation in which Landline is requires serious consideration as to whether to go for net revenue or gross revenue. To quickly recap on the two, gross revenue is the cash inflow generated by a company from the sale of goods after adjusting the production costs without any other deductions considered. Net revenue, on the other hand, is derived by deducting taxes and all other expenses from the gross revenue of that company. The relationship between Landline and PRU qualifies as a retail business and in retail, the income gotten from a company through sales after deducting maintenance expenses and commissions among other expenses is called net revenue. If the expenses of a company are in the form of commissions, refunds or depreciation, net revenue is found after deducting taxes as well. The gross revenue is significant...
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...Guillermo Furniture Store and Pro Forma Analysis Guillermo Navellez, once the owner of the largest flourishing furniture store in Sonora, Mexico faces globalization and the emergence of foreign competition. Inexpensive labor and the abundance of timber in Sonora are major factors, which contributed to the manufacturing of the store’s furniture. Guillermo faces new competition that possesses advanced technology with the ability to manufacture faster and at lower costs. With the emergence of this sophisticated technology, the company requires change to cease the decease of revenue and sales (University of Phoenix, 2012). Guillermo hires Jevaloch Consulting Firm, Incorporated to examine his current business forecast and choose strategies in optimal working capital. Additionally, Jevaloch will also provide an efficient pro forma budget and recommend an implementation plan. Guillermo Furniture Forecast Forecasting is an important tool for estimating the future market value for the business. Jevaloch consultants began the examination of Guillermo Furniture by reviewing a six month Figure 1.1 Budget Sales Forecasts. Figure 1.2 Actual Sales Forecasts. projection of sales forecast for units of chairs, the top sales item for the store, sold from January to June 2010. Figures 1.1 and 1.2 are representative of the budget unit sales and actual unit sales for Guillermo Furniture. The average monthly demands for the budget sales is 18,014/6 = 3002.3 and 17,997/6 = 2999.5 for...
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...University FINA310-1301A-02: Professor Michael James Micro Chip Computer Corporation 1. To calculate the percentage growth, one must do the following: • Find the present year’s sales and the previous year’s sales. • Subtract the previous year’s sales from the present year’s sales. • Then, divide the answers by the previous year’s sales. • To turn it into a percentage, multiply the decimal by 100 (Brooks, 2010). With that being said, Net Sales for 2004 through 2008 are as follows: 2004: $11,062 2005: $11,933 (11933-11062)*100/11062=7.87% 2006: $9,181 (9189-11933)*100/11933= -23% 2007: $6141 (6141-9181)*100/9181= -33.11% 2008: $8,334 (8334-6141)*100/6141= 35.71% 2009: $9,167.40 (8334*.10) =833.4+8334=$9,167.40 2. The revenue that is expected for 2009 is $9,167.40. According to the annual percentage growth rate, it is not likely that the business will reach its sales prediction. For 2008, the business had a very large growth rate. This business had a small growth rate that was barely more than 2 % of the 10 % goal for 2005, and a somewhat strong negative growth for 2006 and 2007. The sales trend is pointing downwards. Following 2005, the average annual growth rate has been -3.15 % during the last 4 years. According to the financial data sheet, I do not feel that Micro Chip Computer Corporation will achieve a 10 % sales goal for 2009. 1. Current % of Sales 2008/2009 Prediction Sales $8,334-$10,000 Cost of Sales $5,458 multiplied by 100 and then divided...
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...DATE: 11-05-2005 TO: Louis Woo, CEO, Inventec Corporation FROM: Mitt Romney, Senior Consultant, Brain Consultancy RE: Securing Inventec’s Future Success Being one of Taiwan’s leading Original Design Manufacturers (ODM), in 2005 Inventec stands at a crossroads. So far Inventec’s economic activities focused on designing and manufacturing electronic products for OEMs, mainly western companies, which distributed them using their strong brand names. Since 1995 notebook PCs have been the mainstay of Inventec’s business (Appendix A). However computer industry-wide price and margin erosions are expected to continue. Having only a few core customers, ODMs have become increasingly dependent on their western counterparts, a circumstance which is used against them to obtain lower prices. This is especially true for Inventec (Appendix B). More diversified contract manufacturing partnerships and an increasing consolidation in their industry have increased OEMs’ negotiating strengths as well. As those clients have adopted aggressive pricing strategies, the only thing that counts is how fast you can deliver the lowest cost product. Exploiting even cheaper labor seems almost impossible, since large ODMs have already moved the largest proportion of their manufacturing to low-cost areas in mainland China. Meanwhile Inventec has also developed and marketed software under its own brands. As the PC hardware sector shows signs of weakening, the...
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...Team Name CASE CRACKERS Report Title CeeCee in the next 5 years University Nanyang Technological University Team members Chen Xinyi Lee Wai Hon Gabriel Liu Xinyi Yeo Shi Yuan 1 TABLE OF CONTENTS Page 1. Executive Summary ………………………………………..3 2. Introduction ……………………………………………….. 4 3. Strategic Analysis…………………………………………..5 3.1 Company Analysis 3.2 Industry Analysis 3.3 SWOT analysis 4. Financial Analysis…………………………………………..8 4.1 Financial Ratios 5. Issues Analysis and Recommendations………………..10 5.1 Prioritization of Issues 5.2 Core Competencies Issues 5.2.1 5.2.2 Distributor‟s Strike Failure of the New Online IT System 5.3 Diversification and Marketing Plans 5.3.1 5.3.2 Celebrity Marketing Expansion into Jewellery Range 5.4 Child labour accusations 6. Achievability of the five-year plan………………………..22 7. Summary of Issues and Recommendations …………... 23 8. Appendices…………………………………………………24 2 1.0 EXECUTIVE SUMMARY This report aims to prioritise, analyse and evaluate the current issues plaguing CeeCee. The report begins with a strategic and financial analysis of CeeCee and the industry. The 4 main issues CeeCee face have been categorized into 2 broad categories, namely issues that threaten core competencies and plans relating to expansion and marketing. The issues that threaten core competencies are more pressing issues that CeeCee should address, given the highly tangible impact and risks present which will threaten business profitability. For...
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...We have the following figures at Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, in order to find out to add five new chairlifts eventually: • One lift costs $ 2 million • Preparing and installing the lifts costs $ 1.3 million • 300 additional skiers on the slopes allowable • Only 40 days needed • Running the new lift will cost $ 500 a day for 200 days the lodge is open • The tickets at Deer Valley is $ 55 a day 1. *Incremental Revenue: $ 55.00 per day Additional skiers: 300 Days needed: 40 days 55 x 300 x 40 = $ 660,000 Total Incremental Revenue *Incremental cost: $ 500 per day Days in service: 200 500 x 200 = 100,000 Total Incremental Cost *Then, we calculate the Profit - The difference between the Incremental Revenue – The Incremental cost $ 660,000- $ 100,000 = $ 560,000 Incremental Profit Initial outlay=cost of lift + preparing and installing cost =2,000,000 + 1,300,000 = 3,300,000 The before-tax cash flow is then: Year 0: -3,300,000 Year 1-20: 560,000 Before-tax NPV is then -3,300,000 + 560,000 ( 1/1.14 + 1/1.142 +…+ 1/1.1420 ) =-3,300,000 + 560,000 x 6.62313055 =-3,300,000 + 3,708,953.11 = 408,953.11 Because the NPV is positive, it is then a profitable investment. 2. The After Cash Flow = 100%- 40% = 60% Net Income = $ 560,000 60% x $ 560,000 = $ 336,000 = The After Tax Cash Flow The rate of return will drop to 8% The NPV factor for 20 years @ 8% = 9.8181. To find the tax savings on the investment...
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...further comparing these two ratios, we found that the Asset Turnover rates of Southwest are in the middle range among all these four companies. However, the Profit Margin Ratios are low compared to its peers. The Comparative Income statement of Southwest shows that it has high sales revenue but it also has relative low net income among the peer groups. It is because Southwest has high expenditures on SG&A, depreciation, depletion and amortization, which are dragging down the net income of Southwest. Furthermore, we analyze the operating income profitability by comparing the RNOA( return on net operating asset), NOPM( net operating profit margin) and NOAT( net operating asset turnover) among these four companies. Southwest has an extremely low RNOA rate compared to its peers. As shown in the exhibit 3a, southwest has a much higher P/E ratio among the peer group. Also as shown in exhibit 3b, Southwest has the highest Net PPE compared to its peers. Southwest’s high PPE increase the Net operating Asset as well as decrease its RNOA ratio. We disaggregated the RNOA to NOPM and NOAT. As we previous mentioned, the profit margin ratio of Southwest is much lower than its peers because it has high sales revenue but low net operating profit. The huge expenditure on depreciating and amortization is the key factor of high operating expense, which also leads to a low net operating profit. Compared to its peer companies, Southwest falls in the high risk but also high potential area of the...
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...Due Diligence Performed by Omar Fahmy : Company Overview Colgate Palmolive was incorporated 1806 in New York City by soap and candle maker William Colgate. Colgate now is a leading multinational firm, operating in 200 countries and territories, within the personal, oral & home care and pet nutrition industry. It is headquartered in Midtown Manhattan and it employs 38,600 people. Colgate is traded in the New York Stock Exchange with “CL” as its ticker symbol and is a component of the S&P500 index. The stock is currently trading at $108.00 as of close at November 23 and has a market capitalization of $51 billion. The company has a solid history for stable earnings and dividends and is run by a responsible management. The company’s fiscal year ends in December. Colgate’s primary competitor on the scale of the global market is Procter & Gamble. Colgate is most famous for Colgate dental products, Palmolive shampoos, Irish Spring soap and Speed Stick deodorant. They also sell pet products under their “Hill’s” brand. Key Information Colgate-Palmolive Co http://www.colgatepalmolive.com 300 Park Avenue NEW YORK NY 10022 United States Industry Overview The Soap and Other Detergents industry is the main industry Colgate Palmolive is classified in. The industry includes the production, distribution and selling of soaps, detergents, toiletries, perfumes and cosmetics. The industry in the US is composed of 229 companies and is leaded by Procter and Gamble...
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...Week 9 Capstone Question For the Liquidity of both companies The current ratio is a widely used measure for evaluating a company’s liquidity and short-term debt-paying ability. The current ratio for 2005 current assets = current ratio = 10250 Current liabilities 9836 = 1.04 The current ratio for the Coca Cola Company in 2005 is 1.042:1 While the current ration for Pepsi Co. in 2005 is 1.12:1 The current ratio for 2005 current assets = current ratio = 10554 current asset = 1.12 Current liabilities 9406 current liability The profitability Profit margin is a measure of the percentage of each dollar of sales that results in net income. Profit margin is also called the rate of return on sales. For Pepsi Co. 2005 Profit Margin = Net Income 4078 Net Sales 4977(1716+3261) = 0.819 or 81.9% For The Coca Cola Company 2005 Net income 4872 Net sales 6982= (4701+2281) =0.698 or 69.8% Solvency ratios measure the ability of a company to survive over a long period of time. For Pepsi Co. Debt to total assets Ratio = Total debts 17476 Total Assets 31727 = 0.550 or 55% The Coca Cola Company Debt to total assets Ratio = Total debts 19644 Total Assets 29427 =...
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...Q1, Power, hourly personnel of operations and corporate service are variable with respect to revenue, and the rest are all fixed. Due to the power expense and hourly personnel salaries directly depend on the hours. Q2, Items Month | Jan. | Feb. | Mar. | Power | Costs | $1,546 | $1,485 | $1,697 | | Hours | 329 | 316 | 361 | | Cost per hour | $4.70 | $4.70 | $4.70 | Operation Personnel | Costs | $7,896 | $7,584 | $8,664 | | Hours | 329 | 316 | 361 | | Cost per hour | $24 | $24 | $24 | Total cost per hour | $28.70 | $28.70 | $28.70 | Q3, Intercompany sales = 205 hours * $ 400 = 82,000 Commercial sales = 138 hours * $800 = 110,400 Total Variable Expense = (Power + operation hourly personnel) * hours = ($4.70+$24)*(205+138) = $9844.10 Contribution margin = Sales revenue – Variable costs = $192,400 - $9,844 = $182,556 Contribution Income Statement: Sales | | Intercompany sales | $82,000 | Commercial sales | $110,400 | Total | $192,400 | Less Variable Costs: | Power | $1,612 | Operations: hourly personnel | $8,232 | Contribution Profit | $182,556 | Contribution Margin | 95% | Less Fixed Expense: | Rent | $8,000 | Custodial services | $1,240 | Computer leases | $95,000 | Maintenance | $5,400 | Computer equipment | $25,500 | Office equipment and fixtures | $680 | Operations: salaried staff | $21,600 | System Development and maintenance | $12,000 | Administration | $9,000...
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...Guillermo Furniture Store Scenario NAME HERE ACC/561 DATE Guillermo Furniture Store Scenario Guillermo Navallez is a highly successful manufacturer of furniture in Sonora, Mexico; however, he is coming to the understanding that he no longer holds a competitive economic advantage that he once enjoyed in the past. The reason behind the lack of advantage is due in part to a new international competitor entering the market and challenging the current profit structure with furniture made from robotic production methods. Additionally, the cost of labor has proliferated and an influx of people migrating to Sonora, Mexico has altered the economic state within the area. Guillermo Navallez has several opportunities and alternatives to contemplate in an attempt to counterbalance the negative situations. Upon further analysis, Guillermo Navallez knew that a merger with another company is not a feasible option nor is expanding his management responsibilities as it would impede upon his desires to spend quality time with his family. These alternatives ultimately lead to him advancing his production system to a highly sophisticated laser lathe which would be rather expensive yet it would significantly decrease production costs. The other alternative would to become a representative for a Norwegian manufacturer who had been looking for channels to distribute in North America. Before settling on a permanent decision, Guillermo Navallez must first evaluate his current budget and performance...
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