...sheet looks like this: Assets Liabilities and Owner’s Equity Value of stock $75,000 Loan from broker $37,500 Equity $37,500 (b) (i) If the stock price goes up by 10%, the total value of stock is $75 × (1 + 10%) × 1000 = $82,500 The liability is $37,500 × (1 + 6%) = $39,750. Therefore, the equity in account is $82,500 - $39,750 = $42,750. The balance sheet one year later is: Assets Liabilities and Owner’s Equity Value of stock $82,500 Loan from broker $39,750 Equity $42,750 The dividend payment that the investor received during holding period is $2.5 × 1000 = $2,500. So investor’s holding period return is HPR = ($42,750 - 37,500 + 2,500) / $37,500 = 20.67% (ii) If year-end ex-dividend price of stock does not change, the total value of stock is $75,000. The liability is $39,750. Therefore, the equity in account is $75,000 - $39,750 = $35,250. So investor’s holding period return is HPR = ($35,250 - 37,500 + 2,500) / $37,500 = 0.67% (iii) If year-end ex-dividend price of stock goes down by 10%, the total value of stock is $75 × (1 - 10%) × 1000 = $67,500 The liability is $39,750. Therefore, the equity in account is $67,500 - $39,750 = $27,750. So investor’s holding period return is HPR = ($27,750 - 37,500 + 2,500) / $37,500 = -19.33% (c) Assume that the stock price is P when investor receives a margin call. Then the total value of stock is 1000P. The liability is still $39,750. So the equity in account is 1000P – 39,750. The percentage margin is 25%...
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...Executive Summary Mr. Tom Ho is a married man with a spouse and 2 children. He owns 2 business holding companies. The purpose of this proposal is to outline Mr. Tom Ho's financial status and standing in order to create a financial plan capable of achieving Mr. Tom Ho's life and financial goals. This proposal will address the action plans from several key and fundamental financial aspects, namely, insurance and risk management, savings and investments, education planning, retirement and estate planning and also, tax planning. The action plans and recommendations shall act as a guide in assisting Mr. Tom Ho to achieve sufficient financial protection, lower tax burdens, increased investment (passive) income, good retirement planning and also proper estate planning. The financial plan outlines all the financial planning and strategies that are designed and developed to: • Help to set aside an emergency fund preparing the client for unfortunate events and mishaps. • Provide client with budgeting plan and cash flows planning to support client and family's current lifestyle. • Help client in accumulating sufficient retirement funds to support him and his spouse's retirement lifestyle and needs. • Establish a profitable investment portfolio with balanced assets allocation according to client's risk profile and prospect analysis report. • Assist client in reducing client's tax burden by utilizing tax reliefs and other tax savings methods and strategies...
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...Following billing 25% pays same month NO cash discount 30% is collected In second month after billing- Remainder is uncollectible Accounts Receivable 1012500 Other Renting Unused warehouse Space 24000 Total expected Receipts ___________________________________________________________ ------------------------------------------------------------------------------------------------ Expected payments Sixty percent of all purchases: selling, Administrative, Advertising is paid in month incurred With the remainder paid in the following month. Ending Inventory is 25 percent of the next months budgeted cost of goods sold. October November December Equipment 250000 Other such dividends 45000 Accounts Payable 3541555 Other Payables 53200 Raw Materials Inventories 150388 Other At a meeting with Mr. Chester and Mr. Wayne to discuss concerns regarding findings in the Cash Budget has left both of them feeling uneasy regarding specific details of the Cash report budget. Accordingly, Mr. Wayne believes that the gross margin perhaps may shrink to 27.5 percent due to higher purchase prices and is also concerned with the impact that this may have on borrowings. This is a logical concern as gross margin shrinks amid higher purchasing prices/costs. As stated in Stewart (1987) Pricing is a crucial but often misunderstood aspect of retailing. Questions about pricing include the relation between margin and markup...
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...Chapter 15 Stockholders’ Equity Instructor: WANG Kun Department of Accounting Course outline The corporate form – general introduction Corporate capital Issuance of stock Reacquisition of shares: treasury stock Preferred stock Dividend policy Presentation and analysis 2 The corporate classification Ownership form Public sector corporations: such as stated- owned Private sector corporations: Profit oriented non-profit profit-seeking Stock company 3 Capital stock system In the absence of restrictions, each share carries the following rights: To share proportionately in profits and losses. To share proportionately in management (the right to vote for directors) To share proportionately in corporate assets upon liquidation. To share proportionately in any new issues of stock of the same class --- called the preemptive right (stock right/warrant) --- which is eliminated by many Corp.s. (think about reasons) 4 Types of stocks Common Stock: residual corporate interest that bears the ultimate risks of loss and receives the benefits of success Preferred Stock: sacrifice certain rights (list in previous slide) in return for other special rights or privileges, based on contracts between the corporation and its stockholders Will common stock and preferred stock of the same company have the same price in stock market? 5 Accounting Issues Accounting for par value stock. Accounting for no-par stock Accounting for stock issued...
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...include in COGM (as was done in case of Birla 3M) or (ii) subtract from Gross Sales (exclude from COGM) as shown below: Gross Sales 100 Less: Excise duty (30) Net Sales 70 Excise duty amount to be shown in income statement = (Opening balance of advance excise duty + ED paid during the year – closing balance of advance excise duty). (b) Non-manufacturing companies Provide break-up of expenses under the headings (like Cost of Sales, General & Admin, Selling & Distribution, Finance Charges), if given/asked. (c) Please remember instances of: (i) converting asset into expense (prepaid rent, insurance, write-offs of non-refundable deposits, etc.) (ii) converting liability into revenue (Unearned/deferred revenue) (iii) apllying accrual concept for revenue not received or expenses not paid. (d) Trade discounts on purchases are always netted off. Similarly, trade discounts on sales shall be netted off. Cash discounts shall be shown under “Selling & Distribution Expenses.” (e) If the asset is sold during the year then depreciation expense till the date of sale must be considered. In slot 1, we will follow SLM for depreciation. Profit/loss on sale of asset = Sale realisation – book value of the asset at the time of sale (f) Income tax amounts...
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...Capital Structure Recommendation There are a number of capital structure options available to provide funding for a Canadian expansion. Capital structure strategy should have two main objectives: align with operating strategy and maximize total shareholder returns. Too much debt leverage can lead to credit default and insolvency. Capital financing using bonds has risks because some types of bonds may place responsibility on the company to provide dividends, which could impact shareholder earnings. Capital structure is how operations and growth are financed. Different sources may be used; a combination of long term debt, short term debt, equity and preferred debt. Proper capital structure planning should strengthen the balance sheet, and increase the ability to face loss and change. Based on this strategy, review and analysis of the options presented, the approach of 50% preferred and 50% common stock is recommended. This approach maximizes Earnings Per Share, EPS, or shareholder return. The chart below details the results of using the Canadian Budgeted Earnings, moderate forecast, and calculating a 5 year average Earnings Before Interest and Tax, EBIT, of $112,581. By plugging $112,581 into the Capital Structure Analysis, we see the 50/50 approach maximizes EPS, as detailed in the chart below. The Alternative Capital Resources and EPS chart below presents each option and the expected EPS. For financing using only bonds, the EPS is .045, using 20% bonds EPS is .052,...
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...FPL – An OverviewFPL Group, Inc. is Florida’s largest electric utility company. In 1925, through the consolidation of numerous electric and gas companies, they formed Florida Power & Light Company (FP&L). FP&L grew steadily over the next 50 years until rising fuel costs, operating issues, and construction costs began to decrease profitability. In the mid-1980s, FPL diversified with four major acquisitions - Colonial Penn Life Insurance Company, Telesat Cablevision, Inc., CBR Information Group Inc., and Turner Foods Corporation- in order to minimize the potential risk within the utilities industry. To address problems in operations, FPL began a rigorous program of Japanese-inspired quality control. Management succeeded in transforming FPL into a lean operational system resulting in a drop in scheduled downtime from 18% to 4%, while customer complaints also fell by 60%. By 1989, FPL was recognized as “one of the best-managed U.S. corporations.” Despite the progress in quality, FPL was still dealing with problems: Colonial Penn was losing money, there were safety concerns about a particular nuclear plant, and demand was growing faster than capacity. In 1989, James Broadhead succeeded Chairman Marshall McDonald. Broadhead placed an emphasis on commitment to quality and customer service, increasing focus on the utilities industry, expanding capacity, and improving cost positions. He took measures to scale back the intense quality controls while still working to preserve...
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...Investment Report Jane & Douglas Breighton Investment Report Jane & Douglas Breighton Best Choice Investment Solutions | FINM3008 Best Choice Investment Solutions | FINM3008 Minggang Gu|u5108473 Kejie Wang|u5133766 Tutorial Thursday 4pm Suggested Asset Allocation Breighton Holdings 14% Australian Equities 0% World Equities, Unhedged 0% World Equities, Hedged 11% Emerging Markets 13% EQUITIES 38% Australian Fixed Income 13% World Fixed Income, Hedged 19% Australian Index-Linked Bonds 0% Australian Cash 1% FIXED INCOME 33% Australian Listed Property 8% Australian Direct Property 9% PROPERTY 17% Hedge Funds 9% Commodities 1% US Private Equity 2% ALTERNATIVES 12% TOTAL 100% Contents Some critical assumption……………………………2 Asset Class Considerations………………………….2 Equities…………………………………………………..2 Fixed Income………………………………………….3 Alternatives and Property………………………4 Analysis Mothod………………………………………….5 Historical 3 Year Rolling Returns…………….5 Bootstrap Analysis………………………………….5 Mean-Variance Optimizer……………………..6 Results…………………………………………………………7 Final Recommendation……………………………….8 Building a Concrete Portfolio for Jane and Douglas Breighton………………………………….8 Appendices………………………………………………….9 References………………………………………………..13 Minggang Gu|u5108473 Kejie Wang|u5133766 Tutorial...
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...accounting may satisfy user’s needs for information about operating performance and financial position, it does not provide sufficient information about the cash flow effects of a firm’s operating, investing, and financing activities. The latter is the purpose of the statement of cash flows. The statement of cash flows reports changes in the investing and financing activities of a firm. Significant changes in property, plant, and equipment affect the structure of assets on the balance sheet, for example, the age of the assets. Significant changes in long-term debt or capital stock affect the maturity structure of debt and the mix of debt versus shareholder financing. 6.3 6.4 6-1 © 2013 Cengage Learning. All rights reserved. No distribution allowed without express authorization. Solutions 6.5 The indirect method reconciles net income, the primary measure of a firm’s profitability, with cash flow from operations. Some...
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...and transport the required amount of electricity to meet this demand). When there is a shortfall in the electricity supply, there can be a need to reduce demand very quickly to an acceptable level, or risk the entire electricity network becoming unstable and shutting down completely. This is known as a “cascade”. Event and can end in a total or wide spread network shutdown affecting very large areas of country. Load shedding normally happens in two ways: Automatic Load Shedding: This is a result of concurrent failures of major element(s) in the national grid(e.g. co-incidental generator or key transmission line failures), resulting in protection schemes initiating the automatic isolation of additional parts of the national grid, to protect the entire grid from cascading to a total blackout. Automatic load shedding always occurs on the transmission system level, with the result being large amounts of electricity and large blocks of customers taken off supply in a very short time. Typical load reduction amounts can be in the order of 1000MW 2000MW, affecting hundred of thousands of customers. Manual (Selective) Load Shedding: Typical load reduction amounts can be in the order of 50MW – 100MW This occurs where time is available (typically up to 60mins) to make selective choice on what customers are shed. Selective load shedding often occurs on the distribution system...
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...FINANCIAL STATEMENTS ANALYSIS Objectives At the end of this chapter you should be able to: 1. Describe the meaning and relevance of financial analysis. 2. Discuss the users of financial statements. 3. Describe sources of financial statements. 4. Describe in detail financial ratios. 5. Define financial forecasting. 6. Discuss the types of comparison used in financial statement analysis 7. Compute financial ratios and use them to evaluate financial strengths and weaknesses. 8. Discuss the limitations of financial statement analysis Financial analysis is the process or critically examining in detail, accounting information given in financial statements and reports. It is a process of evaluating relationship between component parts of financial statements to obtain a better understanding of a firm’s performance. A ratio is simply a mathematical expression of an amount or amounts in terms of another or others. A ratio may be expressed as a percentage, as a fraction, or a stated comparison between two amounts. The computation of a ratio does not add any information not already existing in the amount or amounts under study. A useful ratio may be computed only when a significant relationship exists between two amounts. A ratio of two unrelated amounts is meaningless. It should be re-emphasized that a ratio by itself is useless, unless compared with the same ratio over a period of time and/or a similar ratio for a different company and the industry. Ratios focus attention on relationships...
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...Assignment on Analysis of Balance Sheet Structure Of Financial Institutions Submitted to Farjana Lalarukh Professor Department of Finance University of Dhaka Submitted by Group- |Sl No. |Name |Roll | |01 |Moriom Akter |045 | |02 |Tamanna Afrin Mitul |071 | |03 |Rowson Akter |083 | |04 |Tahmina Haque |097 | |05 |Esrat Jahan |061 | Date of submission August 30, 2012. 1. Commercial Banks Commercial Bank is a major player of the context of a country’s economy. As a financial intermediary it plays a very crucial role. In a developing country like us bank is the major and sometime the only reliable source of savings and landing. In identifying the components of balance sheet of commercial bank almost same items are found in both in Property & Asset and Liabilities & Capital. As a sample I have taken four banks- Mercantile Bank Ltd., One Bank...
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...the current year both businesses make a net profit of $60,000. Neither business distributes any funds to the owners in the year. For the current year, Tomas must report $60,000 of income on his individual tax return, but Lucy is not required to report any income from the corporation on her individual tax return. | a. | True | | b. | False | ANSWER: | True | RATIONALE: | Proprietorship profits flow through to the owner and are reported on the owner’s individual income tax return. It does not matter how much of the profit is withdrawn from the proprietorship. Thus, Tomas must report the net profit of $60,000 on his Form 1040 (Schedule C). Shareholders are required to report income from a C corporation only to the extent of dividends received. Consequently, Lucy has no income to report from the corporation for the current year. | POINTS: | 1 | DIFFICULTY: | Easy | LEARNING OBJECTIVES: | SCPE.HRMY.15.LO: 17-01 - LO: 17-01 | NATIONAL STANDARDS: | United States - BUSPORG: Analytic | STATE STANDARDS: | United States - AK - AICPA: FN-Reporting | KEYWORDS: | Bloom's: Application | OTHER: | Time: 2 min. | | 2. Carol and Candace are equal partners in Peach Partnership. In the current year, Peach had a net profit of $75,000 ($250,000 gross income – $175,000 operating expenses) and distributed $25,000 to each partner. Peach must pay tax on $75,000 of income. | a. | True | | b. | False | ANSWER: | False | RATIONALE: | A partnership...
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...TESCO's position and performance before and after this development. In reviewing TESCO's financial position and performance I will be using various financial ratios to evaluate its performance, market risk, liquidity as well as future prospect of the company. As with many other industries, grocery and food industry’s growth will be affected in a volatile market. However the effect of a economic recession in this industry could be limited compare to other industries as grocery and food is not considered, to some extend, a luxury industry and people will need to buy food and clothes even in the recession. 2- Financial Market Analysis and its effect on the retail market The credit crunch of 2007–2010 was triggered by a liquidity shortfall in the United States banking system. The result is a collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. Another area that has suffered is the housing market...
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...b. Concept of Zero Coupon (Discount) Bonds and Coupon Bonds. c. Bond Characteristics d. Bond Types – Fixed Rate, Floating Rate, Inverse Floater Rate, etc. e. Interest Rates – Discrete and Continuous Compounding f. Bond Pricing – using ZCYC or YTMC with discrete compounding or continuous compounding g. Difference between bond coupon rate and bond yield h. Calculating Bond Yield (YTM, CY, MMY, ZCY/Spot, Par Yield, etc.) i. Price Yield Relationship Introduction to Financial Statistics and Econometrics 1. Introduction to Financial Statistics a. Frequency distributions b. Measures of Central Tendency/Location (Mean/Mode/Median) c. Dispersion, Measures of Dispersion (Variance/SD/Quartiles/Percentiles/Ranges) and its relevance to Risk Management d. Correlations 2. Introduction to Probability Theory a. Random variables b. Probability and its uses c. Probability Rules d. Conditional Probabilities e. Probability Distributions (Single Variable) i. Continuous Time/Discreet Time; Continuous Value/ Discreet...
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