...Strategic Management Project: Module 1 1. Give a short account of the history of the company, and trace the evolution of its strategy. Try to determine whether the strategic evolution of your company is the product of intended strategies, emergent strategies, or some combination of the two. Walgreens has a long history spanning over a century. Charles Walgreen founded his first store in 1901. His first store was in Barrett's Hotel in Chicago's south side. The early stores experimented with many entrepreneurial ideas. The algreens.com web site, under the Our Past section, states, "Walgreens continued to come up with new, important ways to service customers and - just as importantly - employ thousands of people during this period of extreme economic distress"(5). Walgreens had flourished during very hard economic times, and had 500 stores by the 1930s. Early Walgreens stores used soda fountains to increase revenue. Walgreens became a publicly traded company in 1927. They started radio advertising in 1931. Charles Walgreen died in 1939 at the age of 66. Walgreens is growing faster now than ever before. The Walgreens.com web site, under the Our Past section, explains, "Today, with 500 new stores opening each year and 7,000 Planned by 2010, Walgreens continues to innovate"(7). Walgreens has always maintained a simple strategy. Although the strategy changed over the years to mention newer innovations, the basic principles of the strategy have remained similar. The Walgreens.com...
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...for their kind recommendation, submission, direction, cooperative and their collaboration. I want to give my special thanks to the Academic Supervisor Professor Md. Didarul Islam, Department of Accounting for his support and enormous help, especially his guidelines throughout the period of preparing this term paper. Declaration I do hereby Solemnly declare that the work submitted in the term paper titled “Sources of Short-Term Financing in Bangladesh” has been carried out by me and has not been previously submitted to any other university, college, organization for an academic purpose or certificate or diploma degree. This work that I have submitted does not break any existing copyright and no portion of this report is copied from any work done earlier for a degree or otherwise. I further undertake to indemnify the department against any loss or damage arising from breach of the forgoing obligations. Md. Golam Kibria BBA(hon’s) Final Year Reg. No. 09101626055 Major: Accounting Supervisor’s Certificate This is to certify that the term paper on “Sources of Short-Term Financing in Bangladesh” submitted for the award of the Degree of Bachelor of Business Administration, National University, with major in Accounting, is a record of original work carried out by Md. Glam Kibria, Reg. No. 09101626055 under my supervision. No part of this term paper has been submitted for any Degree, Diploma, Title or Recognition Before. I recommended this term paper for submission to the Department...
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...sold for cash. Goods from inventory are sold on account. A fixed asset is sold for cash for less than book value. A fixed asset is sold for cash for more than book value. Corporate income tax is paid. Payment is made to trade creditors. Cash is obtained through a short-term bank loan. Cash is obtained through a long-term bank loan. A cash dividend is declared and paid. Accounts receivable are collected. Merchandise is purchased on account. Cash advances are made to employees. Minority interest in a firm is acquired for cash. Equipment is acquired for cash. + + + + + 0 0 0 + – 0 0 0 – – WCR 0 – + 0 0 + + 0 0 0 – 0 + 0 0 NSF – – 0 – + + 0 – + – 0 + + + NET PROFIT 0 + + – + 0 0 0 0 0 0 0 0 0 0 3. Reconstructing a balance sheet. Sales 20 days of sales 360 days of sales Accounts receivable 40 days of sales Inventory Inventory = $400,000 = ($400,000/20) × 360 = $7,200,000 = ($7,200,000/360) × 40 = $800,000 = Sales/6 = $7,200,000/6 = $1,200,000 Working capital requirement (WCR): WCR = .20 × Sales = .20 × $7,200,000 = $1,440,000 Accounts payable Since WCR Accounts payable = (Accounts receivable + Inventory) – Accounts payable, = (Accounts receivable + Inventory) – WCR = ($800,000 + $1,200,000) – $1,440,000 = $560,000 Net fixed assets Net fixed assets Net fixed assets = Total assets – Current assets = Total assets – Inventory – Accounts receivable – Cash = $5,000,000 – $1,200,000 – $800,000 – $400,000 = $2,600,000 Short-term debt Liabilities = .60 × total assets...
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...Goals 1. Review the key components of credit terms, accounts payable, and the procedures for analyzing them. 2. Understand the effects of stretching accounts payable on their cost and on the use of accruals. 3. Describe interest rates and the basic types of unsecured bank sources of short-term loans. 4. Discuss the basic features of commercial paper and the key aspects of international short-term loans. 5. Explain the characteristics of secured short-term loans and the use of accounts receivable as short-term-loan collateral. 6. Describe the various ways in which inventory can be used as short-term-loan collateral. ( True/False 1. Accounts payable are spontaneous secured sources of short-term financing that arise from the normal operations of the firm. Answer: FALSE Level of Difficulty: 1 Learning Goal: 1 Topic: Accounts Payable 2. Notes payable can be either spontaneous secured or spontaneous unsecured financing and result from the normal operations of the firm. Answer: FALSE Level of Difficulty: 1 Learning Goal: 1 Topic: Notes Payable 3. Accounts payable result from transactions in which merchandise is purchased but no formal note is signed to show the purchaser’s liability to the seller. Answer: TRUE Level of Difficulty: 1 Learning Goal: 1 Topic: Accounts Payable 4. In credit terms, EOM (End-of-Month) indicates that the accounts payable must be paid by the end of the month in which...
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...Ehsan Javaid Leghari PhD Management Sciences COMSATS Institute of Information Technology Islamabad, Pakistan Email:muhammadehsanjavaid@yahoo.com ABSTRACT Working capital management is necessary for profitability. In this study working capital management of sugar industry and its impact on profitability is checked from 2002 to 2012. Total observations are 308 while 28 companies listed at Karachi Stock Exchange are in sample. Correlation and pooled panel data regression analysis is performed. Results show that day’s inventory, cash conversion cycle, cash ratio, account receivable to sale ratio, short term investment ratio, secured short term obligation and fixed asset ratio are negatively affecting profitability of firm. Whereas quick ratio, days account receivable and working capital are positively affecting profitability. Key words: Return on Asset, Cash Conversion Cycle, Secured Short Term Obligations, Cash Ratio, Account Receivable to Sale INTRODUCTION In finance field two extensively examined areas are capital structure and working capital management. It is matter of great importance both for researchers and corporate individuals to figure out firm’s value and profitability. Working capital management has a direct impact on the firm profitability along with reducing the liquidity risk. Liquidity is one face of coin and profitability is other. It clarify that working capital management is directly proportional of firm profitability. US financial crises highlighted problems in...
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...the firm's current liability accounts. The management of current liabilities requires choosing appropriate levels of financing and involves trade-offs between risk and profitability. This chapter also reviews sources of secured and unsecured short-term financing, including the role of international loans. Spontaneous sources, such as accounts payable and accruals, are differentiated from negotiated bank sources, such as lines of credit. The cash discount offered on accounts payable and the costs of forgoing the discount are described. Secured sources include bank and commercial finance company loans backed by collateral such as inventory or accounts receivable. PMF DISK This chapter's topics are not covered on the PMF Tutor or the PMF Problem-Solver. PMF Templates The following spreadsheet template is provided: Problem 15-8 Topic Cost of bank loan Find out more at www.kawsarbd1.weebly.com 393 Last saved and edited by Md.Kawsar Siddiqui Part 5 Short-Term Financial Decisions Study Guide The following Study Guide examples are suggested for classroom presentation: Example 1 4 Topic Loss of loan discounts Accounts receivable as collateral Find out more at www.kawsarbd1.weebly.com 394 Last saved and edited by Md.Kawsar Siddiqui Chapter 15 Current Liabilities Management ANSWERS TO REVIEW QUESTIONS 15-1 The two key sources of spontaneous short-term financing (financing that arises from the normal operating cycle) are accounts payable and accruals. Both...
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... up a profit and loss appropria2on account for the year ended 31 March 20X8 and balance sheet extracts as that date, from the following: i. Net profits $111,100. ii. Interest to be charged in capitals: Blair $3,000; Short $2,000; Steel $1,500. iii. Interest to be charged on drawings: Blair $400; Short $300; Steel $200. iv. Salaries to be credited: Short $20,000; Steel $25,000. v.Profits to be shared: Blair 70%; Short 20%; Steel 10%. vi. Current account: balances b/d Blair $18,600; Short $9,460; Steel $8,200. vii. Capital account: balances b/d Blair $100,000; Short $50,000; Steel $25,000. viii. Drawings: Blair $39,000; Short $27,100; Steel $16,800. Profit and loss appropria2on account for the year ended 31 march 20x8 $ Net Profit Add; Interest on Drawings Blair Short Steel 400 300 200 900 112,000 Less; Appropriation Interest on Capital Blair Short Steel Salary Short Steel 20,000 25,000 (45,000) 60,500 Share of Profit Blair (60,500 x 70%) Short (60,500 x 20%) Steel (60,500 x 10%) 42,350 12,100 6,050 60,500...
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...it possible to complete this bachelor thesis. 2 “Option strategies – A practical Guideline for Retail Investors” Management Summary This bachelor thesis examines option strategies and what costs and fees an individual investor will be confronted with when trading such instruments in Switzerland. In theory, option strategies are an interesting and multifunctional instrument for every market direction. However, in practice, there are several difficulties which retail investors have to overcome. For example, they have only limited available assets for trading and thus the margin of the broker and the transaction costs significantly influence the potential profit (economies of scale). There are also legal restrictions like naked short selling which essentially complicate trading option strategies efficiently. The methodology of this paper is mainly based on literary research from the Anglo-Saxon and German language area as well as interviews with experts in the banking industry. In this thesis, the twelve biggest retail banks in Switzerland are analysed in relation to costs and trading possibilities as well as 45...
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...The 2007 Intel Annual Report can be found at the following Web site: www.prenhall.com/ fraser. (a) Using the Intel Annual Report, calculate key financial ratios for all years presented. (b) Using the library, find industry averages to compare to the calculations in (a). (c) Write a report to the management of Intel. Your report should include an evaluation of short-term liquidity, operating efficiency, capital structure and long-term solvency, profitability, market measures, and a discussion of any quality of financial reporting issues. In addition, strengths and weaknesses should be identified, and your opinion of the investment potential and the creditworthiness of the firm should be conveyed to management. |(a) and (b) |2007 |2006 |2005 |Ind. | | | | | |Avg.* | |Short-term liquidity | | | | | |Current ratio |2.79 |2.15 | |2.2 | |Quick ratio |2.39 |1.64 | |1.1 | |Cash flow liquidity ratio* |3.27 |2.42 | ...
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...Ch.19 – short-term financing is concerned w/ the analysis of decisions that affect CA & CL (Networking capital=CA-CL) *Short term financial management is called working capital management * The most important difference btwn short-term and long-term is the timing of the cash flows (short term – cash inflows and outflows within a year or less) * Cash = LT – debt + Equity + CL - CA other than cash – Fixed Assets ⇒activities that increase cash: 1. long term debt 2. equity (selling some stock) 3. CL 4. CA other than cash (selling some inventory for cash) 5. fixed assets (selling some property). * Activities that decrease cash (opposite of above) * Operating Cycle – the period between the acquisition of inventory and the collection of cash from receivables. 1. Inventory period – the time it takes to acquire and sell inventory. 2. Accounts receivable period – The time between sale of inventory and collection of receivables. (Operating cycle = Inventory Period + Accounts Receivable Period) * The operating cycle describes how a product moves through the CA accounts moving closer to cash. * Accounts Payable Period – The time btwn receipt of inventory & payment for it. *Cash Cycle – The time btwn cash disbursement and cash collection. The Cash Cycle is the number of days that pass before we collect the cash from a sale, measured from when we actually pay for the inventory. (Cash Cycle = Operating Cycle – Accounts Payable Period) * Cash Flow Timeline - A graphical representation...
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...committing the firm’s funds to a relatively low-yielding (in comparison to fixed assets) investment. II. Managing the firm’s use of current liabilities A. The greater the firm’s use of current liabilities, other things being the same, the less will be the firm’s liquidity. B. There are a number of advantages associated with the use of current liabilities for financing the firm’s asset investments. 1. Flexibility. Current liabilities can be used to match the timing of a firm’s short-term financing needs exactly. 2. Interest cost. Historically, the interest cost on short-term debt has been lower than that on long-term debt. C. Following are the disadvantages commonly associated with the use of short-term debt: 1. Short-term debt exposes the firm to an increased risk of illiquidity because short-term debt matures sooner and in greater frequency, by definition, than does long-term debt. 2. Since short-term debt agreements must be renegotiated from year to year, the interest cost of each year’s financing is uncertain. III. Determining the appropriate level of...
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...reasons for this variance. The term "strategic" means that this approach to financial management has a long-term horizon At the most fundamental level, financial management is concerned with managing an organization's assets, liabilities, revenues, profitability and cash flow. Strategic financial management goes a step further in ensuring that the organization remains on track to attain its short-term and long-term goals, while maximizing value for its shareholders. Strategic financial management also means that short-term goals may occasionally need to be sacrificed to meet longer-term objectives. A typical example is when a loss-making company trims its asset base through factory closures or headcount reduction in order to reduce operating expenses. While such actions have a detrimental effect on near-term results because of restructuring costs and other one-time items, it positions the company to achieve profitability in the longer term. (c ) Short Term Financial Management and Strategy Chapter 15: Short Term Financial Management Learning Goals Describe the scope of short-term financial management and the cash conversion cycle. Explain the funding requirements of the cash conversion cycle and strategies for minimizing negotiated liabilities. Understand inventory management:...
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...CHAPTER 13 REPORTING AND ANALYZING INVESTMENTS Summary of Questions by Objectives and Bloom’s Taxonomy Item | SO | BT | Item | SO | BT | Item | SO | BT | Item | SO | BT | Item | SO | BT | True-False Statements | 1. | 1 | K | 8. | 3 | C | 15. | 4 | C | 22. | 5 | C | 29. | 4 | | 2. | 1 | C | 9. | 3 | C | 16. | 4 | K | 23. | 6 | K | 30. | 5 | | 3. | 2 | K | 10. | 3 | K | 17. | 5 | C | 24. | 6 | K | 31. | 6 | | 4. | 2 | C | 11. | 3 | C | 18. | 5 | K | 25. | 6 | C | | | | 5. | 2 | C | 12. | 3 | K | 19. | 5 | K | 26. | 1 | | | | | 6. | 2 | C | 13. | 3 | K | 20. | 5 | C | 27. | 2 | | | | | 7. | 2 | K | 14. | 4 | K | 21. | 5 | K | 28. | 3 | | | | | Multiple Choice Questions | 32. | 1 | K | 47. | 3 | K | 62. | 3 | K | 77. | 4 | C | 92. | 6 | C | 33. | 1 | K | 48. | 3 | K | 63. | 3 | K | 78. | 5 | K | 93. | 6 | K | 34. | 1 | K | 49. | 3 | AP | 64. | 3 | K | 79. | 5 | K | 94. | 6 | C | 35. | 1 | K | 50. | 3 | AP | 65. | 3 | K | 80. | 5 | K | 95. | 1 | C | 36. | 1 | K | 51. | 3 | K | 66. | 3 | K | 81. | 5 | C | 96. | 2 | AN | 37. | 2 | K | 52. | 3 | K | 67. | 3 | K | 82. | 5 | K | 97. | 2 | C | 38. | 2 | C | 53. | 3 | C | 68. | 3 | C | 83. | 5 | K | 98. | 3 | AN | 39. | 2 | AP | 54. | 3 | C | 69. | 3 | C | 84. | 5 | K | 99. | 3 | AP | 40. | 2 | AN | 55. | 3 | K | 70. | 3 | C | 85. | 5 | AP | 100. | 3 | AP...
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...Thursday June 5 -> contacts broker to buy 2 December gold future contracts Current future price: $ 600 per ounce Contract size: 100 ounces Contracted to buy: 200 ounces at that price Broker Requires the investor to deposit funds in a margin account Amount that must be deposited at the time the contract is entered into is initial margin -> we suppose it is $2,000 per contract $4,000 in total (2x contract of $2,000) At the end of each trading day the margin account is adjusted to reflect the investor’s gain or loss -> this practice is known as marking to market the account Let’s suppose that by the end of June 5 the futures price drops from $600 to $597 -> loss for the investor ($600 =200 * $3), because the 200 ounces for December gold, that were contracted at $600, can now be sold only for $597. The balance in the margin account of $4,000 will now be reduced by $600 to only $3,400. Let’s suppose that by the end of June 5, the first day, the futures price rise to $603, this will cause a gain for investor because the 200 ounces for December gold can be sold for $603 now and the balance in the margin account would increase by $600 to $4,600. The trade is first marked to market at the close of the day it takes place and then it is marked to market at the close of trading on each following...
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...of the factors that were analyzed include current ration, inventory turnover, accounts receivable turnover, and days’ sales in inventory. Most of the values used for the calculations were obtained from Yahoo Finance. Current ratio evaluates a company’s ability to pay its short-term obligations (Wild, 2008). Exxon’s current ratio of 1.47 indicates that it should not have any issues paying its short-term obligations. In contrast, Wal-Mart’s current ratio of 0.88, indicates that the company’s current liabilities exceed current assets and thus investors should be doubtful of its ability to pay short-term obligations. Inventory turnover is another indicator of a company’s ability to pay short-term debt. Specifically, it is the number of times a company’s average inventory is sold during a period (Wild, 2008). Wal-Mart’s inventory turnover of 9.12 indicates that it may be holding more inventory than it needs, and thus it may be using its assets in efficiently. Exxon’s inventory turnover of 28.31 is more preferable, as long as inventory adequately meets demand (Wild, 2008). These numbers show that Wal-Mart may be having difficulties paying its short-term debt and thus caution should be warranted. Accounts receivable turnover measure the quality and liquidity of accounts receivable. Thus it indicates how often receivable are received and collected during the period (Wild, 2008). Exxon’s accounts receivable turnover is 15.6, while Walmart’s is 107.3. Exxon’s low turnover...
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