...(1 i ) i t (1 k t ) ft 1 (1 k t-1 ) t-1 −1 1 1 - (1 i ) -n i 1 PVIFA - Duen,i 1 - (1 i ) -n (1 i ) i -in PV FVe PVIFA n,i m i EIR 1 1 m = [1 + ( i j 1 2 +− )] 365⁄ 2 m 1 −1 NAB≠Principalforfront-end fees, discount interest and compensating balance. FV - Price 365 kn = kr + + kr Bond Equivalen t Yield or Price Term (1 + ) = (1 + )(1 + ) YTM = kr + INF + MRP + LRP + DRP C C FV Pbond (1 k1 ) (1 k 2 ) 2 $FVn (1 in ) n Pzero Pbond $C Holding Period Return P t 1 P Holding Period Return D0 (1 g) t D0 (1 g) D P 1 t (1 k) k-g k-g t 1 k Payout Ratio k-g D1 g P0 Po Price BVPS Book value per share COV(k i , k j ) σi σ j n ~ ~ ~ ~ COV( k1 , k 2 ) Σ Pri k1i E( k1 ) k 2i E( k 2 ) i 1 Pt Pt 1 C t Pt 1 Pt 1 D D t (1 k) k TP0 (1 g) TP1 k-g k-g Po EPS1 ρ ij Pt Pt 1 D t Pt 1 Pt 1 1 $FV 1 - (1 k d ) -n kd (1 k d ) n σ n Pr k i 1 i E(k) 2 i Final Exam Formula Sheet E(k p ) x1 E(k1 ) ... x n E(k n ) 2 σ x 2σ a (1 x) 2 σ 2 2x(1 x)ρa,bσ a σ b b E(k 1 ) Pri k1i E(k i ) k f βi (E(k M ) k f ) E(k i ) - k f βi β p x1 β1...
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...Jeffrey Parrish January 25, 2016 Butler Lumber Company, a lumber company located in the Pacific Northwest, is rapidly expanding and is seeking to borrow more cash to finance its day-to-day operations. However, their current bank, Suburban National, has imposed a limit on their borrowing thus causing Butler to seek funds from another bank, Northrop National. Butler Lumber finds itself in a unique position, as it requires an influx of cash even though sales are growing and the company is generating revenue. Because Mr. Butler wants to take advantage of trade discounts, he uses bank notes to pay his suppliers quickly where he would otherwise be unable to with operating cash flows. As his business grows, he purchases more and more inventory on account, requiring larger amounts of debt to pay off. Under current operating procedure, Mr. Butler will need to find another bank to lend him money so that he can continue to operate his business. Based on current projections, it is estimated that the Butler Lumber Company will need to obtain approximately $215,000 from Northrop National Bank to meet their current obligations. Table 1 shows a detailed pro forma balance sheet for the Butler Lumber Company for the years 1988 through 1991. This $215,000 number is calculated on the assumption that sales for 1991 will be $3.6 million and that management will continue to use the cash obtained via the bank loan to pay suppliers in order to obtain a trade discount. In addition, it is assumed...
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...exception of Land which was (and continues to be) carried at RM2,000 below its market value. Details of intragroup inventory sales for the year ended 31 December 2010 were: * Upper Ltd sold inventory with a carrying amount of RM22,000 to Lower Ltd for RM30,000. 15% of this inventory was held by Lower Ltd held at the end of the year. * Lower Ltd sold inventory with a carrying amount of RM10,000 to Upper Ltd for RM15000. 60% of this inventory was held by Upper Ltd held at the end of the year. Details of intragroup inventory sales for the year ended 31 December 2011 were: * Upper Ltd sold inventory with a carrying amount of RM15,000 to Lower Ltd for RM25,000. 40% of this inventory was held by Lower Ltd held at the end of the year. * Lower Ltd sold inventory with a carrying amount of RM12,000 to Upper Ltd for RM20000. 25% of this inventory was held by Upper Ltd held at the end of the year. During 2011 all upstream sales were for cash while all downstream sales were on credit with 5% remaining outstanding at the end of the year. Since the beginning of the current year Lower Ltd has rented unused office space to Upper Ltd at the rate of RM150 per month. Each month's rent is paid in advance on the final day of the previous month. On 1 August 2009 Upper Ltd provided Lower Ltd a 5-year interest-only loan of RM3,600 at 10% p.a. Interest is charged quarterly in arrears from the date of the loan. On 31 December 2007 Lower Ltd sold to Upper Ltd an item...
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...Financial & Managerial Accounting Instructor: Alexis Kythreotis Financial statements according to IFRS: 1.Balance sheet/Statement of financial position …A list of all assets owned , all liabilities owed by a business and Owners’ equity, as at a particular date. Basically, it is a snapshot of the financial position of the business at a particular moment (it does not cover a period). …An asset is something valuable which a business owns or can use. According to IFRS/IAS an asset is a resource controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity. …A liability is something which is owed to somebody else. According to IAS/IFRS a liability is a present obligation to the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. Financial statements according to IFRS (continue): 2.Income statement …An Income statement is a record of income generated and expenditure incurred (irrelevant to cash payment or cash received) over a given period (and not as at a particular date like the statement of financial position). 3.Comprehensive Income statement … Comprehensive income is the sum of net income and other items that must bypass the income statement because they have not been realized, including items like an unrealized holding gain or loss from available for sale securities and foreign currency translation gains...
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...Formulae Final Examination Financial Accounting and Financial Statement Analysis l Equity Valuation and Analysis l Corporate Finance l Economics Table of Contents 1. Financial Accounting and Financial Statement Analysis 1.1 Generally Accepted Accounting Principles: Assets, Liabilities and 1 Shareholders’ Equities ......................................................................................... 1 1.1.1 1.2.1 1.3.1 1.3.2 1.3.3 Assets: Recognition, Valuation and Classification....................................... 1 Earning per Share ......................................................................................... 1 Profitability Analysis ..................................................................................... 2 Risk Analysis ................................................................................................ 5 Break-Even Analysis .................................................................................... 6 1.2 Financial Reporting and Financial Statement Analysis ...................................... 1 1.3 Analytical tools for Assessing Profitability and Risk......................................... 2 2. Equity Valuation and Analysis 2.1.1 2.1.2 2.1.3 7 2.1 Valuation Model of Common Stock .................................................................... 7 Dividend Discount Model............................................................................. 7 Free Cash Flow Model...
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...I O N TO C O R P O R AT I O N P R AC T I C E S E T No More Ice, Inc. 1 3 4 5 6 7 No More Ice, Inc. E. I. No. 98-7654321 A Schedule Attached to and Made Part of 2012 Form 1120—U.S. Corporation Income Tax Return List of Attached Schedules Schedule O—Consent Plan and Apportionment Schedule Form 1125-A—Cost of Goods Sold Forms 8949—Sales and Other Dispositions of Capital Assets Form 4626—Alternative Minimum Tax—Corporations Schedule D—Capital Gains and Losses Schedule G (Form 1120)—Information on Certain Persons Owning the Corporation’s Voting Stock Form 1125-E—Compensation of Officers Attachment—Supporting Details 9 11 12 13 14 15 16 17 18 19 20 21 INFORMATION FOR INSTRUCTORS CORPORATION PRACTICE SET (2013-2014 EDITION) No More Ice, Inc. Following are details on some of the calculations in the solution. Observations are made on areas which the students may find more difficult. You can reduce the difficulty of the practice set if you so choose by providing your students “clues” (or even the solutions) in some or all of these areas. Paragraph references are to the facts for the practice set. 1. Computation of Cost of Goods Sold (Form 1125-A). Amounts for beginning and ending inventories and for cost of goods sold are provided. Students must “back into” the cost of purchases; e.g., Cost of Goods Sold ........................................................................... Inventory Adjustment...
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...= net income/net sales = 118,290/452,510 = 26.14% c. Accumulated depreciation = 212,820 + 12,510 = $225,330. Assignment 2.2: a. b. Assume for this problem that the number given for Net income is actually Net income available to common stockholders (that is, reported Net income minus preferred dividends). Thus, Annual addition to Retained earnings = Net income available to common stockholders – Common stock dividends paid. Thus, Common stock dividends paid = Net income – Addition to (i.e., change in) Retained earnings. Common stock dividends paid = 25,400 – (89,280 – 79,880) = 16,000. Dividends per share = Dividends divided by number of shares outstanding. Number of shares outstanding = Common Stock divided by par value per share = 60,000/.20 = 300,000. Dividends per share = $0.053 or 5.3 cents per share. c. Cash spent on new plant and equipment = Depreciation for the year as listed on the income statement plus the change in net fixed assets. Thus, Cash spent on fixed assets in 1999 = 10,260 + (202,640 – 184660) = $28,240. Assignment 2.3: 1. $4,055,740 $4,100,144 Although Gross sales decreased by 2 percent, net sales (the only number reported) show an increase of 1.1 percent. Since Returns and allowances are estimates made by management, there is some chance that the growth in sales conclusion may be misleading. 2. Cost of goods sold = Beginning inventory + Purchases – Ending inventory. a. $174,300 b. $218,500 3. First solve for accumulated...
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...applicable in this situation. 2. Identify the accounting principle(s) applicable to each of the following situations: A. Tim Roberts owns a bar and a rental apartment and operates a consulting service. He has separate financial statements for each. B. An advance collection for magazine subscription is reported as a liability titled Unearned Subscriptions. C. Purchases for office or store equipment for less than $25 are entered in Miscellaneous Expense. D. A company uses the lower of cost or market for valuation of its inventory. E. Partially completed television sets are carried at the sum of the cost incurred to date. F. Land purchased 15 years ago for $40,500 is now worth $346,000. It is still carried on the books at $40,500. G. Zero Corporations is being sued for $1 million for breach of contract. Its lawyers believe that the damages will be minimal. Zero reports the possible loss in a note. 3. The primary current source of generally accepted accounting principles or nongovernmental operations is the A. New York Stock Exchange B. Financial Accounting Standards Board C. Securities and Exchange Commission D. American Institute of Certified Public Accountants E. None of the above. 4. What is the underlying concept that supports the immediate recognition of a loss? A. Matching B....
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...firm will tend to _____________________. A) accept profitable, low risk projects and reject unprofitable, high risk projects B) accept profitable, low risk projects and accept unprofitable, high risk projects C) reject unprofitable, high risk projects D) become more risky over time E) accept profitable, low risk projects 2. Delta, Inc. follows a flexible short-term financing policy. The firm produces educational toys, which is a cyclical business. When the firm needs to pay for large inventories in advance of peak sales, the firm will: A) Sell marketable securities. B) Negotiate a bankers acceptance. C) Arrange for a field warehouse loan. D) Issue a trust receipt to the bank in exchange for funding. E) Issue commercial paper with a maturity of 270 days or less. 3. The present value of eliminating float is equal to the amount of ______________. A) mail float B) collection float C) processing float D) total float E) availability float St.$Francis$Xavier$University$ Department)of)Business)Administration) BSAD)342:)Cases)in)Financial)Management) ) Final$Examination$ Winter)2010) ) Prof.)Kirk)Collins) 4. The theory that a change in the capital structure weights is exactly offset by the change in the cost of equity is known as: A) Homemade leverage. B) Financial leverage. C) The targeted capital structure theory. D) M&M Proposition I. E) M&M Proposition II. 5. BDJ, Inc. has 31,000 shares of stock outstanding with...
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...Annual Report Workbook Getting under the hood of an Annual Report and knowing what’s inside by Donald Bittar Introduction You can use this workbook for analyzing many companies and saving your analysis for each one, like many professionals. Just like them, over time, you can compare a company’s actual performance to your analysis and predictions. Saving your analysis sheets can help sharpen you analytical skills. The questions in the workbook are numbered the same way as they are in the book, ‘Getting Under the Hood of an Annual Report’. As there are no questions in the first chapter of the book, the workbook starts with Chapter 2. It will make it easier for you to relate the questions in the workbook to those in the book. Your input to the workbook will appear in a dark green font while the questions appear in blue. The different font colors can make it easier for you to see your work. You’ll need to do some number crunching to complete your annual report analysis. The Big Calculating Tool, located on your CD, can save you a great deal of time and make the number crunching nearly painless. Every ratio and calculation for the book is included in the Big Calculating Tool. You’ll have more time for analysis if you use the Big Calculating Tool. Table of Contents Questions for Chapter 2 4 Question 2.0 – What do you want to learn about company and why? 4 Question 2.1 - Fundamental Information Set For Your Company 4 Question 2.2...
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...Chapter 9 Foreign currency transactions and Hedging foreign exchange risk Answers to Questions 1. Under the two-transaction perspective, an export sale (import purchase) and the subsequent collection (payment) of cash are treated as two separate transactions to be accounted for separately. The idea is that management has made two decisions: (1) to make the export sale (import purchase), and (2) to extend credit in foreign currency to the foreign customer (obtain credit from the foreign supplier). The income effect from each of these decisions should be reported separately. 2. Foreign currency receivables resulting from export sales are revalued at the end of accounting periods using the current spot rate. An increase in the value of a receivable will be offset by reporting a foreign exchange gain in net income, and a decrease will be offset by a foreign exchange loss. Foreign exchange gains and losses are accrued even though they have not yet been realized. 3. Foreign exchange gains and losses are created by two factors: having foreign currency exposures (foreign currency receivables and payables) and changes in exchange rates. Appreciation of the foreign currency will generate foreign exchange gains on receivables and foreign exchange losses on payables. Depreciation of the foreign currency will generate foreign exchange losses on receivables and foreign exchange gains on payables. 4. Hedging is the process of eliminating exposure to foreign exchange risk...
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...*Current ratio=Current assets/Current liabilities, *Quick ratio = (Current assets – Inventory)/Current liabilities, *Cash ratio=Cash/Current liabilities, *Net working capital=Net working capital/Total assets, *Interval measure=Current assets/Average daily operating costs,*Average daily operating costs=Cost of goods sold/365,*Total debt ratio=(Total assets – Total equity)/Total assets,*Debt/equity ratio=Total debt/Total equity,*Equity multiplier=Total assets/Total equity,*Long-term debt ratio=Long-term debt/(Long-term debt + total equity),*Times interest earned=EBIT/Interest,*Cash coverage ratio=(EBIT + Depreciation)/Interest,*Inventory turnover=Cost of goods sold/Inventory,*Day’s sakes in inventory=365days/Inventory turnover,*Receivable turnover= Sales/Accounts receivable,*Day’s sales in receivables= 365days/Receivable turnover,*NWC=Current assets – Current liabilities,*NWC turnover= Sales/NWC, *Fixed asset turnover=Sales/Net fixed assets,*Total asset turnover=Sales/Total assets,*Profit margin= Net income/Sales,*Return on assets(ROA)=Net income/Total assets,*Return on equity(ROE)= Net income/Total equity,*ROE= (Net income/Sales) x (Sales/Assets) x (Assets/Equity),*Price-earnings ratio= Price per share/earnings per share,*Earnings per share= Net income/# of share issued,*Market-to-book ratio=Market value per share/book value per share,*Book value per share= total equity/# of shares issued,*Capital intensity ratio= Total assets/Sales,*Dividend payout ratio= Dividends/Net income=Yearly...
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...The Statement of Cash Flows Purpose of a statement of cash flows: To provide information about the cash inflows and outflows of an entity during a period. To summarize the operating, investing, and financing activities of the business. The cash flow statement helps users to assess a company’s liquidity, financial flexibility, operating capabilities, and risk. The statement of cash flows is useful because it provides answers to the following important questions: Where did cash come from? What was cash used for? What was the change in the cash balance? Specifically, the information in a statement of cash flows, if used with information in the other financial statements, helps external users to assess: 1. A company’s ability to generate positive future net cash flows, 2. A company’s ability to meet its obligations and pay dividends, 3. A company’s need for external financing, 4. The reasons for differences between a company’s net income and associated cash receipts and payments, and 5. Both the cash and noncash aspects of a company’s financing and investing transactions. What can we learn from SCF that is not already available in the other financial statements? It provides answers to important questions like: Where did cash come from? What was cash used for? What was the change...
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...Decrease in liabilities=distribution §721 does not apply when an incoming partner contributes personal services to a partnership in exchange for ownership interest. Capital interest: ordinary compensation to extent of interest, becomes partner’s initial outside basis (ex. substantial risk of forfeiture) Profits/Losses interest: does not recognize current income because there is no initial liquidation value; initial basis is zero, recognize income to extent of future profits + Original basis of contribution + Additional contributions + Increase in share of liabilities + Distributive share of taxable K income (inc. capital gains) + Distributive share of tax-exempt K income – Distributions of cash and property – Decrease in share of liabilities – Distributive share of nondeductible expenses – Distributive share of losses = Partner’s outside basis for interest §83 election: taxed now instead of when restriction lapses, good if stock price increases Computation of Partnership Taxable Income * Same as individual; Form 1065—ordinary business income or loss * However, must classify income in two groups * Separately stated items: capital gains and losses, §1231 gains and losses, investment income and expenses, net rental income or loss, and charitable contributions; page 4 of Schedule K, 1065 * Non-separately stated items: all taxable items of income, gain, loss or deduction that do not have to be separately stated; page 1 of 1065 ...
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...The Statement of Cash Flows Purpose of a statement of cash flows: To provide information about the cash inflows and outflows of an entity during a period. To summarize the operating, investing, and financing activities of the business. The cash flow statement helps users to assess a company’s liquidity, financial flexibility, operating capabilities, and risk. The statement of cash flows is useful because it provides answers to the following important questions: Where did cash come from? What was cash used for? What was the change in the cash balance? Specifically, the information in a statement of cash flows, if used with information in the other financial statements, helps external users to assess: 1. A company’s ability to generate positive future net cash flows, 2. A company’s ability to meet its obligations and pay dividends, 3. A company’s need for external financing, 4. The reasons for differences between a company’s net income and associated cash receipts and payments, and 5. Both the cash and noncash aspects of a company’s financing and investing transactions. What can we learn from SCF that is not already available in the other financial statements? It provides answers to important questions like: Where did cash come from? ...
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