Problem #1 The HR Pickett corporation has $500,000 of debt outstanding, and pays an interest rate of 10% annually, Pickett's annual sales are $2 millions, it's average tax rate is 30% , and it's net profit margin on sales 5%. If the company does not maintain a TIE ratio of at least 5 times, it's Bank's will refuse to renew the
How can you compare an organization to its competitors? How can organizations with increasing sales run into financial difficulties? Which ratios might help find this situation?
How do fixed costs create operating leverage? Why is this significant? How does operating leverage impact the overall risk level of the company?
1- What should you consider when comparing fixed assets turnover of one firm to others? In other words, can you simply compare the ratios and explore the differences or should we strive to learn more before conducting such an analysis? 2 - Class, do you think it is easier to manipulate ratios that come from the balance sheet
I need some assistance in trying to analyze and answer the balance sheet and income statements for the attachment. The following are balance sheets for Scott Company as of the end of the Years 1 and 2: Balance Sheet Year 2 Year 1 Cash 189 50 Accounts Receivable 950 750 Inventory 500
When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair market value of $100,000. 11. What amount should have been reported for the land on a consolidated balance sheet, assuming the economic unit concept was used? A) $ 70,000 B) $ 75,000 C) $ 85,000
Can systematic risk be mitigated?
How can diversification help reduce unsystematic risk?
As a homeowner, you often receive solicitations to open a home equity line of credit. They are enticing, but you know that a growing number of Americans have lost their homes in recent years due to becoming victim to predatory lenders. Some of these victims are consumers who try to free themselves from credit card debt through a
How to calculate demand requirements for Alternative B. See attached file for full problem description.
SCENARIO 1 Mrs. Kumal Mubarek is the CEO of a small business in Bangladesh that produces mattresses. To keep up with increasing demand, she needed a bank loan to help build her company's capacity. But the bank she approached denied her loan application for whatever reason and she does not know where to turn. What would you do?
If a company can expect an extra $2 million in sales if it enters a new market and it knows that 15% of its sales will be uncollectible, collection costs will be 2% on all new sales, and the company's production and selling costs are 80% of sales and it also has a tax rate of 30%, what will the company's net income be. Also
Sales for the year just ended were $400, and fixed assets were used at 80 percent of capacity, but its current assets were at optimal levels. Sales are expected to grow by 5 percent next year, and the dividend payout ratio is 60 percent. How much additional funds (APN) will be needed? A firm has the following balance sheet (s
1) Green Manufacturing, Inc, plans to announce that it will issue $2 million of perpetual debt and use the proceeds to repurchase common stock. The bonds will have a 6-percent annual coupon rate. Green is currently an all-equity firm worth $10 million with 500,000 shares of common stock outstanding. After the sale of the bond
Comprehensive problem on amortization: 1st January 2006, Maple Leaf Corporation reported the following property, plant, equipments. Assets Cost Estimated life Salvage value Accumulated amortization Land 4500000 N.A. Nil Building 6000000 40 years Nil 3300000 Equipment 2000000 10 years Nil 1250000 During 2006 followi
The factors that are listed below raise some interesting thoughts. If you were calling the shots for any organization where would you focus your attention? Management Attitudes: There is room for managerial judgment (i.e., tastes and preferences) in determining a firm's optimal capital structure. Where do you stand on this is
What are the functions of the major financial markets? What is the difference between the primary and secondary markets? What is the difference between the capital markets and the money markets?
Bob Brown was recently involved in a minor auto accident. His car was hit from behind, and he, in turn, slammed into the car in front of him. He would like someone to explain his coverage and show him where, in his auto policy, each of his losses might be covered. The explanantion of coverage and the location of coverage should
Every company has capital projects. IBM must need something! Be it a new wing to the building, a new product line to be funded, a new piece of equipment, find one new acquisition your company needs. Identify a capital project for IBM and Once you have identified the new budgeted item, what problems are you going to have getti
Use the information contained in your selected organization's balance sheet and income statement to calculate the following ratios: 1) Liquidity ratios a) Current ratio b) Acid-test (quick) ratio c) Receivables turnover d) Inventory turnover 2) Profitability ratios a) Asset t
See attached file for full problem description. Study Guide- ch 2 Practice 2-7 Income Statement Preparation Precision Corporation has been a leading supplier of magnetic storage disks for three years. Followingare the results of Precision's operations for 2006. Sales revenue . . . . . . . . . . . . $68,000 Advertising
What is the impact on consolidated financial statements of upstream and downstream transfers? a. No difference exists in consolidated financial statements between upstream and downstream transfers. b. Downstream transfers affect the computation of the noncontrolling interest's share of the subsidiary's income but upst
Part A: The market portfolio is assumed to be composed of two securities, Investment X and Y as shown below. Determine based on the information given the average return, the standard deviation and coefficient of variation. Which is the better investment? Year Return X Return Y 1997 16.5% 17.5% 1998 14.2% 13.2% 1999 13.5% 14.
According to portfolio theory, people should hold more than one asset (or investment) in their portfolios. The idea is that if some investments do poorly, other investments in the portfolio can compensate for the poor investments. Some experts claim, however, that not all people in a society follow this prescription. In other wo
The goal of finance is to maximize shareholder wealth, not to maximize profit. Can anyone tell me why these two goals are different, and why one is preferred over the other?
Consider two individuals living in the country of Depressia. Depressian banking system is very unstable. On average, 5% of all banks collapse every year. Each of these individuals is considering depositing all their life savings - $10,000 - in a bank for one year. Banks pay fixed interest, so that by the end of the year all woul
How is an organizations hurdle rate determined?
Investing in the Stock Market Assume your grandparents have just given you $20,000 on the condition that you invest the money in the stock market. As you contemplate making your investment choices... what accounting information do you want to help identify companies that will have high future rates of return? Creditor and In
You own a portfolio of two stocks (X and Y), with 40% of the portfolio invested in Stock X. You have observed over many years that the variance of your portfolio value is 0.0144 and that the correlation between the stock X and stock Y is 0.7. If the standard deviation of Stock X is 0.20, what is the standard deviation of the sto
Calculating returns and Variability: Using the following returns, calculate the average returns, the variances and the standard deviations for X and Y. Returns Year X Y 1 16% 34% 2 18% -7% 3 -9% -12% 4 21% 41% 5 2% 10% See attached file for full problem description.