Part 2 According to AASB 117, a lease is defined as “an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time” (Certified Public Accountant Australia [CPA], 2009). Leasing is potentially advantageous to organizations in terms of maintaining effective asset management (Noland, 2006). For instance, due to changes in the dynamic business environment organizations are able to replace leased assets more
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Statement Debt and Investments The Walt Disney Company reported debt in a number of ways on their financial statements. The first place debt securities are shown is under Current Liabilities on the Consolidated Balance Sheet. The Current Portion of Borrowings, at $2,342 billion, lists that portion of debt that is due to be paid within the next year. The second place that debt appears on the Consolidated Balance Sheet is under Borrowings. Disney shows over $12.676 billion in long-term debt. Therefore
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These financial reports involved a study of their balance sheets, income statements and cash flow statements from the start of 2008 until 2011. The balance sheet for the four year course involves a summary of the company’s assets and also its equity. In rechecking the balance sheet, a person can infer that cash and equivalents for the year 2008 were documented to be at $2,063.4 million. The corporation encountered a reduction in their cash and equivalents in the year 2009 that is documented to
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the merger of GrandMet and Guinness. In 2000, the company announced its intention to sell its packaged food subsidiary, Pillsbury, and 20% of its Burger King subsidiary. Because of the restructuring opportunity, the company wanted to rethink its financing mix. In this case, the tradeoff between the costs and benefits of different leverage policies will be discussed. A simulation model was created by Diageo’s director of Finance and Capital Markets, Ian Simpson, and Adrian Williams, the firm’s Treasury
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Resource: University of Phoenix Material: Guillermo’s Furniture Store Scenario Write no more than a 700-word paper explaining the finance concepts found in the readings and how they relate to the context of the scenario. Format your paper consistent with APA guidelines. When someone takes an action, that action eliminates other possible actions. Informally, people often refer to an unused opportunity as an opportunity cost. More precisely, an opportunity cost is the difference between
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companies are determining whether an investment must be undertaken, they decide if the investment will add to or detract from the value of the firm. There are several determining factors in evaluating an investment. These include project free cash flow versus accounting profits, incremental cash flows, net present value, and internal rate of return. Caledonia Products is deciding whether to undertake a new investment project. The firm must determine the cash flows for the life of the project, calculate
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finances its assets. There are two main types of capital: Equity and debt. Capital structure is usually a mix of debt, preferred stock, and common stock that the company can use for expansion and to remain financially healthy. The key is to choose the right mix in order to maximize shareholder return. A1. Capital Structure Capital structure is generally defined as how a company finances its assets. It is measured as a percentage of debt and equity (common and preferred stock). Potential investors tend
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Theory of Investment’ 3 Modigliani & Miller 2 6 Modigliani and Miller 3 7 Modigliani & Miller – 1958 4 12 Fama & French (1998) ‘Taxes, Financing Decisions, and Firm Value’ 18 FAMA FRENCH 2 20 Fama & French 3 21 Fama & French – 1998 4 22 Graham (2000) ‘How Big Are the Tax Benefits of Debt?’ 25 GRAHAM (2000) 2 28 Graham 3 29 How big are the tax benefits of debt? John Graham – 2002 4 29 Lecture 2 32 Myers (1984) ‘The Capital Structure Puzzle’ 32 MYERS (1984) The Capital Structure Puzzle 2 36
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are based on cash flows, not accounting income (Incremental cash flows are to be considered, not sunk costs) 2) Cash flows are based on opportunity costs 3) The timing of cash flows is important 4) Cash flows are analyzed on an after-tax basis 5) Financing costs are reflected in the project’s required rate of return Net Present Value (NPV) The NPV is the sum of present values of all expected incremental cash flows if a project is undertaken. The discount rate used is the firm’s cost of capital
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Chapter 4 Financial Planning and Forecasting LEARNING OBJECTIVES After reading this chapter, students should be able to: • Briefly explain the following terms: mission statement, corporate scope, corporate purpose, corporate objectives, and corporate strategies. • Briefly explain what operating plans are. • Identify the six steps in the financial planning process. • List the advantages of computerized financial planning models over “pencil-and-paper” calculations
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