Question 2 - Mini Case: Thus, the annual data look somewhat worse than final monthly data. We can also calculate Zumwalts debt ratio in a similar manner, given the facts of the problem. A quick, temporary fix is not an appropriate solutionit just delays the inevitable.
Note that, as with inventories, an average figure for receivables would be better than the end-of-year amount.
Calculate the current and quick ratios based on the projected balance sheet and income statement data. It does not include notes payable or any other short- term debt that charges interest.
A quick check of the ratios shows that the company's credit has not deterioratedthe current and quick ratios have increased, and the debt ratio has gone down slightly. Cash, receivables, and inventories, as well as current liabilities, vary over the year for firms with seasonal sales patterns.
It is found by adding EBITDA and lease payments then dividing this total by interest charges, lease payments, and sinking fund payments over one minus the tax rate. Clouded Vision, Financial World, May 23,p.
Thus far, sales have not been up to the forecasted level, costs have been higher than were projected, and a large loss occurred in Year 2, rather than the expected profit. Computrons debt-to-equity ratio for is 1.
What is the ethical dilemma. Although the equipment has a six-year useful life, it is classified as a special-purpose computer, so it falls into the MACRS three-year class.
In any of these cases, we could have had you use the funds generated to retire debt, which would have lowered interest charges and consequently increased net income and EPS.
Net cash flow is the bottom-line amount of cash that the firm generates during an accounting period, which represents the total cash inflows minus the total cash outflows.
Management is interested in all types of ratios for two reasons. Cash Marketable securities Net accounts receivable Inventories Total current assets Property and equipment Less accumulated depreciation Net property and equipment Total assets Liabilities and shareholders' equity Current liabilities: If depreciation doubled, taxable income would fall to zero and taxes would be zero.
In some situations, this is a better measure of debt usage than the debt ratio. Basic earning power is calculated by dividing EBIT by total assets. The analyst should be aware of, and include in the interpretation, the fact that: Note, however, that reducing accounts receivable by 10 days of sales is not a cost-free action.
What effect did it have on liabilities and equity. Why is it important. This is the amount of interest-bearing debt plus preferred stock plus common equity minus short-term investments. If a firm is growing rapidly, year-end equity will be much larger than beginning-of-year equity, so the calculated rate of return on equity will be different depending on whether end-of-year, beginning-of-year, or average common equity is used as the denominator.
How does Computron compare to the industry with respect to financial leverage. The hospital has decided that it wants to purchase at least one and maybe two fast food franchises, to take advantage of the high volume of patients and visitors that walk through the lobby all day long.
Ordinary corporate operating losses can be carried backward for 2 years or forward for 20 years to offset taxable income in a given year. At the same time, the lease liability might not be shown as a debt. From Du Pont equation: Seasonal factors can distort ratio analysis. The inflation rate 5 percent per year is used only to calculate desired retirement income.
There have been many reports of firms that have followed a strategy similar to that described in this chapter's ethical dilemma. Which project should be accepted if they are mutually exclusive.
An individual would have assets, and a net worth, and a balance sheet would detail these holdings.
Ratio Current ratio Days sales outstanding Inventory turnover Fixed assets turnover Debt ratio Profit margin on sales Return on assets 3. As noted earlier, inventory valuation and depreciation methods can affect the financial statements and thus distort comparisons among firms that use different accounting procedures.
The company had doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. What is free cash flow. However, statistical procedures can be used to analyze the net effects of a set of ratios.
Do these ratios indicate investors are expected to have a high or low opinion of the company?. 11 MINI CASE Donna Jamison, a recent graduate of the University of Tennessee with four years of banking experience, was recently brought in as assistant to the chairman of the board of Computron Industries, a manufacturer of electronic calculators.
The company doubled its plant capacity, opened new sales offices outside its home territory, and. This analysis raises the question of whether Computron is holding excess inventories (relative to its sales level), and also whether any of its inventories is old and obsolete, hence worth less.
Donna Jamison, a recent UNC graduate with four years of for-profit health management experience, was recently brought in as assistant to the chairman of the board of Computron Diagnostics, a manufacturer of clinical diagnostic equipment. Computron Industries - Jamison Analysis Words | 8 Pages Running head: MINI CASE - CHAPTER 3 Mini Case - Chapter 3 Computron Industries – Jamison Analysis Mini Case - Chapter 3 Computron Industries, a manufacturer of electronic calculators, has been going through some growth over the course of the and years.
CHAPTER 2 QUESTIONS The four financial statements contained in most annual reports are the balance sheet, income statement, statement of retained earnings, and statement. Computron Industries - Jamison Analysis Essay. Running head: MINI CASE – CHAPTER 3 Mini Case – Chapter 3 Computron Industries – Jamison Analysis Mini Case – Chapter 3 Computron Industries, a manufacturer of electronic calculators, has been going through some growth over the course of the and years - Computron Industries - Jamison Analysis Essay introduction.Computron industries jamison analysis