Long-term Financial Planning
|
|
- Lizbeth Elliott
- 7 years ago
- Views:
Transcription
1 Long-term Financial Planning
2 What is Financial Planning? Formulates the way financial goals are to be achieved. Requires that decisions be made about an uncertain future. Recall that the goal of the firm is to maximise the market value of the owner s equity growth will result from this goal being achieved.
3 Dimensions of Financial Planning The planning horizon is the long-range period that the process focuses on (usually two to five years). Aggregation is the process by which the smaller investment proposals of each of a firm s operational units are added up and treated as one big project. Financial planning usually requires three alternative plans: a worst case, a normal case and a best case.
4 Accomplishments of Planning Interactions linkages between investment proposals and financing choices. Options firm can develop, analyze and compare different scenarios. Avoiding surprises development of contingency plans. Prediction is very difficult, particularly when it concerns the future (M. Twain) Feasibility and internal consistency develops a structure for reconciling different objectives.
5 Elements of a Financial Plan An externally supplied sales forecast (either an explicit sales figure or growth rate in sales). Projected financial statements (pro-formas). Projected capital spending. Necessary financing arrangements. Amount of new financing required ( plug figure). Assumptions about the economic environment.
6 Example A Simple Financial Planning Model Recent Financial Statements Financial performance Financial position Sales $100 Assets $50 Debt $20 Costs 90 Equity 30 Net Income $ 10 Total $50 Total $50 Assume that: 1. Sales are projected to rise by 25 per cent 2. The debt/equity ratio stays at 2/3 3. Costs and assets grow at the same rate as sales
7 Example A Simple Financial Planning Model Pro-Forma Financial Statements Financial performance Financial position Sales $ 125 Assets $ 62.5 Debt $25 Costs Equity 37.5 Net $ 12.5 Total $ 62.5 Total $ 62.5 What is the plug? Notice that projected net income is $12.50, but equity only increases by $7.50. The difference, $5.00 paid out in cash dividends, is the plug.
8 Percentage of Sales Approach A financial planning method in which accounts are varied depending on a firm s predicted sales level. Dividend payout ratio is the amount of cash paid out to shareholders. Retention ratio is the amount of cash retained within the firm and not paid out as a dividend. Capital intensity ratio is the amount of assets needed to generate $1 in sales. i.e. Total Asset / Sales
9 Example Financial Performance Statement Sales $1000 Costs 800 Taxable Income 200 Tax (30%) 60 Net profit $ 140 Retained earnings $112 Dividends $28
10 Example Pro-Forma Financial Performance Statement Sales (projected) $1 250 Costs (80% of sales) Taxable Income 250 Tax (30%) 75 Net profit $ 175
11 Example Steps Use the original financial position statement to create a pro-forma; some items will vary directly with sales. Calculate the projected addition to retained earnings and the projected dividends paid to shareholders. Calculate the capital intensity ratio.
12 Example Financial Position Statement Assets Current assets ($) (% of sales) Cash Accounts receivable Inventory Total Non-current assets Net plant and equipment Total assets
13 Example Financial Position Statement Liabilities and owners equity Current liabilities ($) (% of sales) Accounts payable Notes payable 100 n/a Total 400 n/a Long-term debt 800 n/a Shareholders equity Issued capital 800 n/a Retained earnings n/a Total n/a Total liabilities & s holders equity n/a
14 Example Partial Pro-Forma Financial Position Statement Assets Current assets ($) Change Cash 200 $ 40 Accounts receivable Inventory Total $300 Non-current assets Net plant and equipment $450 Total assets $750
15 Example Partial Pro-Forma Financial Position Statement Liabilities and owners equity Current liabilities ($) Change Accounts payable 375 $ 75 Notes payable Total 475 $ 75 Long-term debt Shareholders equity Issued capital Retained earnings $140 Total $140 Total liabilities & s holders equity $215 External financing needed 535 $535
16 Example Results of Model The good news is that sales are projected to increase by 25 per cent. The bad news is that $535 of new financing is required. This can be achieved via short-term borrowing, long-term borrowing and new equity issues. The planning process points out problems and potential conflicts.
17 Example Results of Model (continued) Assume that $225 is borrowed via notes payable and $310 is borrowed via long-term debt. Plug figure now distributed and recorded within the financial position statement. A new (complete) pro-forma financial position statement can be derived.
18 Example Pro-Forma Financial Position Statement Assets Current assets ($) Change Cash 200 $ 40 Accounts receivable Inventory Total $300 Non-current assets Net plant and equipment $450 Total assets $750
19 Example Pro-Forma Financial Position Statement Liabilities and owners equity Current liabilities ($) Change Accounts payable 375 $ 75 Notes payable 325 $225 Total 700 $300 Long-term debt $310 Shareholders equity Issued capital Retained earnings $140 Total $140 Total liabilities & s holders equity $750
20 External Financing and Growth The higher the rate of growth in sales/assets, the greater the external financing needed (EFN). Need to establish a relationship between EFN and growth (g).
21 Example Statement of Financial Performance Sales $ 500 Costs 400 Taxable Income $ 100 Tax (30%) 30 Net profit $ 70 Retained earnings $ 25 Dividends $ 45
22 Example Statement of Financial Position Assets ($) (% of sales) Liabilities ($) (% of sales) Current assets Total debt 450 n/a Non-current assets Owners equity 550 n/a Total assets Total 1000 n/a
23 Ratios Calculated p (profit margin) = 14% R (retention ratio) = 36% ROA (return on assets) = 7% ROE (return on equity) = 12.7% D/E (debt/equity ratio) = 0.818
24 Growth Next year s sales forecasted to be $600. Percentage increase in sales: $100 $500 20% Percentage increase in assets also 20 per cent.
25 Increase in Assets What level of asset investment is needed to support a given level of sales growth? For simplicity, assume that the firm is at full capacity. The indicated increase in assets required equals: A g where A = ending total assets from the previous period How will the increase in assets be financed?
26 Internal Financing Given a sales forecast and an estimated profit margin, what addition to retained earnings can be expected? This addition to retained earnings represents the level of internal financing the firm is expected to generate over the coming period. The expected addition to retained earnings is: S R g p 1 where: S = previous period s sales g = projected increase in sales p = profit margin R = retention ratio
27 External Financing Needed If the required increase in assets exceeds the internal funding available (that is, the increase in retained earnings), then the difference is the external financing needed (EFN). EFN = Increase in Total Assets Addition to Retained Earnings = A(g) p(s)r (1 + g)
28 Example External Financing Needed Increase in total assets = $ % = $200 Addition to retained earnings = 0.14($500)(36%) 1.20 = $30 The firm needs an additional $200 in new financing. $30 can be raised internally. The remainder must be raised externally (external financing needed).
29 Example External Financing Needed (continued) EFN Increase in total assets Addition to RE A( g) p( S) R (1 g) $1000 (0. 20) 014($500)36% $170
30 Relationship To highlight the relationship between EFN and g: EFN p 014. S R A p S R g $500 36% $ $ g (36%) g Setting EFN to zero, g can be calculated to be 2.56 per cent. This means that the firm can grow at 2.56 per cent with no external financing (debt or equity).
31 Financial Policy and Growth The example so far sees equity increase (via retained earnings), debt remain constant and D/E decline. If D/E declines, the firm has excess debt capacity. If the firm borrows up to its debt capacity, what growth can be achieved?
32 Sustainable Growth Rate (SGR) The sustainable growth rate is the growth rate a firm can maintain given its debt capacity, ROE and retention ratio. SGR 1 ROE ROE R R
33 Example Sustainable Growth Rate Continuing from the previous example: SGR ( ) % The firm can increase sales and assets at a rate of 4.82 per cent per year without selling any additional equity and without changing its debt ratio or payout ratio.
34 Sustainable Growth Rate (SGR) Growth rate depends on four factors: profitability (profit margin) dividend policy (dividend payout) financial policy (D/E ratio) asset utilisation (total asset turnover) Do you see any relationship between the SGR and the Du Pont identity?
35 Summary of Growth Rates 1. Internal growth rate This growth rate is the maximum growth rate that can be achieved with no external debt or equity financing. 2. Sustainable growth rate The SGR is the maximum growth rate that can be achieved with no external equity financing while borrowing to maintain a constant D/E ratio.
36 Important Questions It is important to remember that we are working with accounting numbers and we should ask ourselves some important questions as we go through the planning process. How does our plan affect the timing and risk of our cash flows? Does the plan point out inconsistencies in our goals? If we follow this plan, will we maximise owners wealth?
CHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH
CHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH Answers to Concepts Review and Critical Thinking Questions 5. The sustainable growth rate is greater than 20 percent, because at a 20 percent growth rate
More informationComputing Liquidity Ratios Current Ratio = CA / CL 708 / 540 = 1.31 times Quick Ratio = (CA Inventory) / CL (708 422) / 540 =.53 times Cash Ratio =
1 Computing Liquidity Ratios Current Ratio = CA / CL 708 / 540 = 1.31 times Quick Ratio = (CA Inventory) / CL (708 422) / 540 =.53 times Cash Ratio = Cash / CL 98 / 540 =.18 times 2 Computing Leverage
More informationChapter 4. Long-Term Financial Planning and Growth. Overview of the Lecture. September 2004. What Is Financial Planning. Financial Planning Models
Chapter 4 Long-Term Financial Planning and Growth September 2004 Overview of the Lecture What Is Financial Planning Financial Planning Models The Percentage of Sales Approach xternal Financing and Growth
More informationFinancial Planning and Growth. Background
Financial Planning and Growth (Text reference: Chapter 26) background detailed examples factors affecting growth AFM 271 - Financial Planning and Growth Slide 1 Background financial planning may be thought
More informationFinancial Planning for East Coast Yachts
Financial Planning for East Coast Yachts Prepared for East Coast Yachts Prepared by Dan Ervin, Mary-Ann Lawrence, Kevin Klepacki, Katie Wilson, Andrew Wright January 1, 2010 Table of Contents iii Table
More informationCHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH
CHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH Answers to Concepts Review and Critical Thinking Questions 1. Time trend analysis gives a picture of changes in the company s financial situation over
More informationChapter 17: Financial Statement Analysis
FIN 301 Class Notes Chapter 17: Financial Statement Analysis INTRODUCTION Financial ratio: is a relationship between different accounting items that tells something about the firm s activities. Purpose
More informationCHAPTER 2 FINANCIAL STATEMENTS AND CASH FLOW
CHAPTER 2 FINANCIAL STATEMENTS AND CASH FLOW Solutions to Questions and Problems NOTE: All end-of-chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and
More informationLong-Term Financial Planning and Growth
Long-Term Financial Planning and Growth CHAPTER 4 Boston Chicken Inc., operator and franchiser of Boston Market restaurants, was one of the great success stories of the early 1990s. The firm added restaurants
More informationTopics Covered. Objectives. Chapter 18 Financial Planning
Chapter 18 Financial Planning Topics Covered What is Financial Planning? Financial Planning Models Planners Beware External Financing and Growth Objectives Forecast Financial Statements with the Percentage
More informationIncome Measurement and Profitability Analysis
PROFITABILITY ANALYSIS The following financial statements for Spencer Company will be used to demonstrate the calculation of the various ratios in profitability analysis. Spencer Company Comparative Balance
More informationChapter Financial Forecasting
Chapter Financial Forecasting PPT 4-2 Chapter 4 - Outline What is Financial Forecasting? 3 Financial Statements for Forecasting Constructing Pro Forma Statements Basis for Sales Projections Steps in a
More informationLong-Term Financial Planning and Growth
Long-Term Financial Planning and Growth What is Financial Planning Firms must plan for both the short term and the long term. Short-term planning rarely looks further ahead than the next 12 months. It
More information9901_1. A. 74.19 days B. 151.21 days C. 138.46 days D. 121.07 days E. 84.76 days
1. A stakeholder is: 9901_1 Student: A. a creditor to whom a firm currently owes money. B. any person who has voting rights based on stock ownership of a corporation. C. any person or entity other than
More informationChapter 9 Solutions to Problems
Chapter 9 Solutions to Problems 1. a. Cash and cash equivalents are cash in hand and in banks, plus money market securities with maturities of 90 days or less. Accounts receivable are claims on customers
More informationCHAPTER 2 INTRODUCTION TO CORPORATE FINANCE
CHAPTER 2 INTRODUCTION TO CORPORATE FINANCE Solutions to Questions and Problems NOTE: All end of chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and
More informationModule 2: Preparing for Capital Venture Financing Financial Forecasting Methods TABLE OF CONTENTS
Module 2: Preparing for Capital Venture Financing Financial Forecasting Methods Module 2: Preparing for Capital Venture Financing Financial Forecasting Methods 1.0 FINANCIAL FORECASTING METHODS 1.01 Introduction
More informationNWC = current assets - current liabilities = 2,100
Questions and Problems Chapters 2,3 pp45-47 1. Building a balance sheet. Penguin Pucks, Inc., has current assets of $3,000, net fixed assets $6,000, current liabilities of $900, and long-term debt of $5,000.
More informationWhat is Financial Planning
What is Financial Planning Firms must plan for both the short term and the long term. Short-term planning rarely looks further ahead than the next 12 months. It seeks to ensure that the firm has enough
More informationChapter 3. Financial Planning and Growth SUMMARY EXECUTIVE. 3.1 What Is Financial Planning?
Chapter 3 Financial Planning and Growth EXECUTIVE SUMMARY Corporate financial planning establishes guidelines for change in the firm. These guidelines should include (1) an identification of the firm s
More information1 (a) Calculation of net present value (NPV) Year 1 2 3 4 5 6 $000 $000 $000 $000 $000 $000 Sales revenue 1,600 1,600 1,600 1,600 1,600
Answers Fundamentals Level Skills Module, Paper F9 Financial Management December 2011 Answers 1 (a) Calculation of net present value (NPV) Year 1 2 3 4 5 6 $000 $000 $000 $000 $000 $000 Sales revenue 1,600
More informationKey Concepts and Skills. Standardized Financial. Chapter Outline. Ratio Analysis. Categories of Financial Ratios 1-1. Chapter 3
Key Concepts and Skills Chapter 3 Working With Financial Statements Know how to standardize financial statements for comparison purposes Know how to compute and interpret important financial ratios Know
More informationChapters 3 and 13 Financial Statement and Cash Flow Analysis
Chapters 3 and 13 Financial Statement and Cash Flow Analysis Balance Sheet Assets Cash Inventory Accounts Receivable Property Plant Equipment Total Assets Liabilities and Shareholder s Equity Accounts
More informationFI3300 Corporation Finance
Learning Objectives FI3300 Corporation Finance Spring Semester 2010 Dr. Isabel Tkatch Assistant Professor of Finance Explain the objectives of financial statement analysis and its benefits for creditors,
More informationFNCE 3010 (Durham). HW2 (Financial ratios)
FNCE 3010 (Durham). HW2 (Financial ratios) 1. What effect would the following actions have on a firms net working capital and current ratio (assume NWC is positive and current ratio is initially greater
More informationperformance of a company?
How to deal with questions on assessing the performance of a company? (Relevant to ATE Paper 7 Advanced Accounting) Dr. M H Ho This article provides guidance for candidates in dealing with examination
More informationBusiness 2019 Finance I Lakehead University. Midterm Exam
Business 2019 Finance I Lakehead University Midterm Exam Philippe Grégoire Fall 2002 Time allowed: 2 hours. Instructions: Calculators are permitted. One 8.5 11 inches crib sheet is allowed. Verify that
More informationModule 2: Preparing for Capital Venture Financing Building Pro-Forma Financial Statements
Module 2: Preparing for Capital Venture Financing Building Pro-Forma Financial Statements Module 2: Preparing for Capital Venture Financing Building Pro-Forma Financial Statements TABLE OF CONTENTS 1.0
More informationE2-2: Identifying Financing, Investing and Operating Transactions?
E2-2: Identifying Financing, Investing and Operating Transactions? Listed below are eight transactions. In each case, identify whether the transaction is an example of financing, investing or operating
More informationHOME PRODUCT CENTER PUBLIC COMPANY LIMITED BALANCE SHEETS AS AT DECEMBER 31, 2003 AND 2002
BALANCE SHEETS AS AT DECEMBER 31, 2003 AND 2002 Assets Note 2003 Baht 2002 Current assets Cash and cash equivalents 2 36,291,871.62 84,051,092.97 Accounts receivable - net 3 121,235,696.40 140,699,262.83
More information2. Financial management:
2. Financial management: Meaning, scope and role, a brief study of functional areas of financial management. Introduction to various FM tools: ratio analysis, fund flow statement, cash flow statement.
More informationCompany Financial Plan
Financial Modeling Templates http://spreadsheetml.com/finance/companyfinancialplan.shtml Copyright (c) 2009-2014, ConnectCode All Rights Reserved. ConnectCode accepts no responsibility for any adverse
More informationHow To Calculate Financial Leverage Ratio
What Do Short-Term Liquidity Ratios Measure? What Is Working Capital? HOCK international - 2004 1 HOCK international - 2004 2 How Is the Current Ratio Calculated? How Is the Quick Ratio Calculated? HOCK
More informationRatio Analysis CBDC, NB. Presented by ACSBE. February, 2008. Copyright 2007 ACSBE. All Rights Reserved.
Ratio Analysis CBDC, NB February, 2008 Presented by ACSBE Financial Analysis What is Financial Analysis? What Can Financial Ratios Tell? 7 Categories of Financial Ratios Significance of Using Ratios Industry
More informationRATIO ANALYSIS AND BUSINESS VIABILITY
RATIO ANALYSIS AND BUSINESS VIABILITY Timeframe: Learning Outcome: Recommended reading: Section overview 18 hours Apply ratio analysis in determining the viability of a business. Marx, J., de Swardt, C.,
More informationCurrent Assets. Current Liabilities. Quick Assets or Liquid Assets. Current Liabilities. 1. Liquidity Ratios 1 Current Ratio Formula.
1. Liquidity Ratios 1 Current Ratio Current Assets Current Liabilities This ratio shows short-term financial soundness of the business. Higher ratio means better capacity to meet its current obligation.
More informationFundamentals Level Skills Module, Paper F7 (INT) 1 (a) Viagem: Consolidated goodwill on acquisition of Greca as at 1 January 2012
Answers Fundamentals Level Skills Module, Paper F7 (INT) Financial Reporting (International) December 2012 Answers 1 (a) Viagem: Consolidated goodwill on acquisition of Greca as at 1 January 2012 Investment
More informationSustainable growth Notes on the concept and estimation of sustainable growth rates
Sustainable growth Notes on the concept and estimation of sustainable growth rates Prepared by Pamela Peterson Drake, Ph.D., CFA Sustainable growth is the rate of growth that is most realistic estimate
More informationFundamentals Level Skills Module, Paper F9
Answers Fundamentals Level Skills Module, Paper F9 Financial Management December 2008 Answers 1 (a) Rights issue price = 2 5 x 0 8 = $2 00 per share Theoretical ex rights price = ((2 50 x 4) + (1 x 2 00)/5=$2
More informationPlease NOTE This example report is for a manufacturing company; however, we can address a similar report for any industry sector.
Please NOTE This example report is for a manufacturing company; however, we can address a similar report for any industry sector. Performance Review For the period ended 12/31/2013 Provided By Holbrook
More informationFundamental Analysis Ratios
Fundamental Analysis Ratios Fundamental analysis ratios are used to both measure the performance of a company relative to other companies in the same market sector and to value a company. There are three
More informationPerformance Review for Electricity Now
Performance Review for Electricity Now For the period ending 03/31/2008 Provided By Mark Dashkewytch 780-963-5783 Report prepared for: Electricity Now Industry: 23821 - Electrical Contractors Revenue:
More informationa. venture financing typically goes to established large companies with impressive histories
Review of Lecture 6 Quiz and Test Questions 1. BS17 Which statement about a venture capitalist is most accurate? a. venture financing typically goes to established large companies with impressive histories
More informationEngineering Economics 2013/2014 MISE
Problem: JS, Inc. shows the following accounting records for 2011: Sales commissions 15000 Beginning merchandise inventory 16000 Ending merchandise inventory 9000 Sales 185000 Advertising 10000 Purchases
More informationChapter 17 Financial Forecasting and Planning
Chapter 17 Financial Forecasting and Planning Slide Contents Learning Objectives 1. An Overview of Financial Planning 2. Developing a Long-term Financial Plan 3. Developing a Short-Term Financial Plan
More informationSection 3 Financial and stock market ratios
Section 3 Financial and stock market ratios Introduction 41 Ratio calculation 42 Financial status ratios 43 Stock market ratios 45 Debt: short-term or long-term? 47 Summary 48 Problems 49 INTRODUCTION
More information6. Financial Planning. Break-even. Operating and Financial Leverage.
6. Financial Planning. Break-even. Operating and Financial Leverage. Financial planning primarily involves anticipating the impact of operating, investment and financial decisions on the firm s future
More informationFundamentals Level Skills Module, Paper F7 (INT)
Answers Fundamentals Level Skills Module, Paper F7 (INT) Financial Reporting (International) June 2013 Answers 1 (a) Paradigm Consolidated statement of financial position as at 31 March 2013 Assets Non-current
More information11. Long term financial planning and growth (part 2)
1 11. Long term financial planning and growth (part 2) In these slides, we go into more detail on long-term planning. Topics include: Partial capacity and lumpy investment in fixed assets Interest and
More informationFinancial Results. siemens.com
s Financial Results Fourth Quarter and Fiscal 2015 siemens.com Key figures (in millions of, except where otherwise stated) Volume Q4 % Change Fiscal Year % Change FY 2015 FY 2014 Actual Comp. 1 2015 2014
More informationInterpretation of Financial Statements
Interpretation of Financial Statements Author Noel O Brien, Formation 2 Accounting Framework Examiner. An important component of most introductory financial accounting programmes is the analysis and interpretation
More informationPaper F9. Financial Management. Thursday 10 June 2010. Fundamentals Level Skills Module. The Association of Chartered Certified Accountants
Fundamentals Level Skills Module Financial Management Thursday 10 June 2010 Time allowed Reading and planning: Writing: 15 minutes 3 hours ALL FOUR questions are compulsory and MUST be attempted. Formulae
More informationAssets = Liabilities + Shareholders equity [2.1] Revenues Expenses = Income [2.2]
Assets = Liabilities + Shareholders equity [2.1] Revenues Expenses = Income [2.2] Cash flow from assets = Cash flow to bondholders [2.3] + Cash flow to shareholders Current ratio = Current assets/current
More informationRELEVANT TO ACCA QUALIFICATION PAPER F9
RELEVANT TO ACCA QUALIFICATION PAPER F9 Analysing the suitability of financing alternatives The requirement to analyse suitable financing alternatives for a company has been common in Paper F9 over the
More informationUnderstanding Financial Management: A Practical Guide Guideline Answers to the Concept Check Questions
Understanding Financial Management: A Practical Guide Guideline Answers to the Concept Check Questions Chapter 3 Interpreting Financial Ratios Concept Check 3.1 1. What are the different motivations that
More informationICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION
ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION OCTOBER 2006 Table of Contents 1. INTRODUCTION... 3 2. FINANCIAL RATIOS FOR COMPANIES (INDUSTRY - COMMERCE - SERVICES) 4 2.1 Profitability Ratios...4 2.2 Viability
More informationFinancial Forecasting (Pro Forma Financial Statements)
Financial Modeling Templates Financial Forecasting (Pro Forma Financial Statements) http://spreadsheetml.com/finance/financialplanningforecasting_proformafinancialstatements.shtml Copyright (c) 2009, ConnectCode
More information32 Financial Statement Analysis
32 Financial Statement Analysis 1 32 Financial Statement Analysis Problems 1. GoodRed Corp. started operations at the beginning of Year 1. Given the pre-closing (but post adjustments) trial balance below,
More informationSolutions to Chapter 4. Measuring Corporate Performance
Solutions to Chapter 4 Measuring Corporate Performance 1. a. 7,018 Long-term debt ratio 0. 42 7,018 9,724 b. 4,794 7,018 6,178 Total debt ratio 0. 65 27,714 c. 2,566 Times interest earned 3. 75 685 d.
More informationEMERSON AND SUBSIDIARIES CONSOLIDATED OPERATING RESULTS (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)
CONSOLIDATED OPERATING RESULTS (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) TABLE 1 Quarter Ended March 31, Percent Change Net Sales $ 5,854 $ 5,919 1% Costs and expenses: Cost of sales 3,548 3,583
More informationChapter 1 Financial Statement and Cash Flow Analysis
Chapter 1 Financial Statement and Cash Flow Analysis MULTIPLE CHOICE 1. Which of the following items can be found on an income statement? a. Accounts receivable b. Long-term debt c. Sales d. Inventory
More informationAssets = Liabilities + Shareholders equity [2.1] Revenues Expenses = Income [2.2]
Assets = Liabilities + Shareholders equity [2.1] Revenues Expenses = Income [2.2] Cash flow from assets = Cash flow to bondholders [2.3] + Cash flow to shareholders Current ratio = Current assets/current
More information1 (a) NPV calculation Year 1 2 3 4 5 $000 $000 $000 $000 $000 Sales revenue 5,614 7,214 9,015 7,034. Contribution 2,583 3,283 3,880 2,860
Answers Fundamentals Level Skills Module, Paper F9 Financial Management December 2012 Answers 1 (a) NPV calculation Year 1 2 3 4 5 $000 $000 $000 $000 $000 Sales revenue 5,614 7,214 9,015 7,034 Variable
More informationFinancial Statements and Ratios: Notes
Financial Statements and Ratios: Notes 1. Uses of the income statement for evaluation Investors use the income statement to help judge their return on investment and creditors (lenders) use it to help
More informationRatios from the Statement of Financial Position
For The Year Ended 31 March 2007 Ratios from the Statement of Financial Position Profitability Ratios Return on Sales Ratio (%) This is the difference between what a business takes in and what it spends
More informationCHAPTER 2 FINANCIAL STATEMENTS, TAXES AND CASH FLOW
CHAPTER 2 FINANCIAL STATEMENTS, TAXES AND CASH FLOW Answers to Concepts Review and Critical Thinking Questions 1. Liquidity measures how quickly and easily an asset can be converted to cash without significant
More informationLecture 5 - Financial Planning and Forecasting
Lecture 5 - Financial Planning and Forecasting Strategy A company s strategy consists of the competitive moves, internal operating approaches, and action plans devised by management to produce successful
More informationFundamentals Level Skills Module, Paper F9
Answers Fundamentals Level Skills Module, Paper F9 Financial Management June 2008 Answers 1 (a) Calculation of weighted average cost of capital (WACC) Cost of equity Cost of equity using capital asset
More informationFinancial Statement and Cash Flow Analysis
Chapter 2 Financial Statement and Cash Flow Analysis Answers to Concept Review Questions 1. What role do the FASB and SEC play with regard to GAAP? The FASB is a nongovernmental, professional standards
More informationCalculating profitability indicators - profitability
Calculating profitability indicators - profitability Introduction When a business is deciding whether to grant credit to a potential customer, or whether to continue to grant credit terms to an existing
More informationA2 Accounting for AQA Blank photocopiable documents
A2 Accounting for AQA Blank photocopiable documents Documents page Stores ledger record 1 Sales, production and purchases budgets 2 Trade receivables and trade payables budgets 3 Labour budgets 4 Cash
More informationChapter 2 Financial Statement and Cash Flow Analysis
Chapter 2 Financial Statement and Cash Flow Analysis MULTIPLE CHOICE 1. Which of the following items can be found on an income statement? a. Accounts receivable b. Long-term debt c. Sales d. Inventory
More informationComprehensive exam Feb.11
Comprehensive exam Feb.11 1 Objectives of the examination Apply the financial management concept to evaluate the company s performance. Relate the results of the analysis to make financial decisions or
More informationFinancial ratio analysis
Financial ratio analysis A reading prepared by Pamela Peterson Drake O U T L I N E 1. Introduction 2. Liquidity ratios 3. Profitability ratios and activity ratios 4. Financial leverage ratios 5. Shareholder
More informationRatio Analysis. A) Liquidity Ratio : - 1) Current ratio = Current asset Current Liability
A) Liquidity Ratio : - Ratio Analysis 1) Current ratio = Current asset Current Liability 2) Quick ratio or Acid Test ratio = Quick Asset Quick liability Quick Asset = Current Asset Stock Quick Liability
More informationUNDERSTANDING FINANCE AND MEMBER EQUITY MY EXPERIENCE AGENDA
UNDERSTANDING FINANCE AND MEMBER EQUITY A Special Presentation for the Strengthening Cooperation Workshop February 21, 2006 by Brian Henehan Senior Extension Associate Cornell Cooperative Enterprise Program
More informationQuestion 1. Marking scheme. F9 ACCA June 2013 Exam: BPP Answers
Question 1 Text references. NPV is covered in Chapter 8 and real or nominal terms in Chapter 9. Financial objectives are covered in Chapter 1. Top tips. Part (b) requires you to explain the different approaches.
More information3 Financial Analysis and Planning
3 Financial Analysis and Planning BASIC CONCEPTS AND FORMULAE 1. Financial Analysis and Planning Financial Analysis and Planning is carried out for the purpose of obtaining material and relevant information
More informationMBA Finance Part-Time Financial Statement Analysis and Cash Flows
MBA Finance Part-Time Financial Statement Analysis and Cash Flows Professor Hugues Pirotte Spéder 1 1 Levers of Performance Return on Equity Return on Invested Capital Leverage Profit Margin Asset Turnover
More informationDiscussion Board Articles Ratio Analysis
Excellence in Financial Management Discussion Board Articles Ratio Analysis Written by: Matt H. Evans, CPA, CMA, CFM All articles can be viewed on the internet at www.exinfm.com/board Ratio Analysis Cash
More informationTotal shares at the end of ten years is 100*(1+5%) 10 =162.9.
FCS5510 Sample Homework Problems Unit04 CHAPTER 8 STOCK PROBLEMS 1. An investor buys 100 shares if a $40 stock that pays a annual cash dividend of $2 a share (a 5% dividend yield) and signs up for the
More informationFinance 3130 Sample Exam 1B Spring 2012
Finance 3130 Sample Exam 1B Spring 2012 True/False Indicate whether the statement is true or false. 1. A firm s income statement provides information as of a point in time, and represents how management
More informationWESTERN DIGITAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS. (in millions; unaudited) ASSETS
CONDENSED CONSOLIDATED BALANCE SHEETS (in millions; unaudited) ASSETS Apr. 1, July 3, 2016 2015 Current assets: Cash and cash equivalents $ 5,887 $ 5,024 Short-term investments 146 262 Accounts receivable,
More informationAssignment Problems For Chapter 3
Page 4 Assignment Problems For Chapter 3 (The solutions for these problems are only available in the solutions manual that has been provided to your instructor.) Assignment Problem Three - 1 (Purchase
More informationChapter Seven STOCK SELECTION
Chapter Seven STOCK SELECTION 1. Introduction The purpose of Part Two is to examine the patterns of each of the main Dow Jones sectors and establish relationships between the relative strength line of
More informationFinancial Ratio Cheatsheet MyAccountingCourse.com PDF
Financial Ratio Cheatsheet MyAccountingCourse.com PDF Table of contents Liquidity Ratios Solvency Ratios Efficiency Ratios Profitability Ratios Market Prospect Ratios Coverage Ratios CPA Exam Ratios to
More informationReturn on Equity has three ratio components. The three ratios that make up Return on Equity are:
Evaluating Financial Performance Chapter 1 Return on Equity Why Use Ratios? It has been said that you must measure what you expect to manage and accomplish. Without measurement, you have no reference to
More informationChapter. How Well Am I Doing? Financial Statement Analysis
Chapter 17 How Well Am I Doing? Financial Statement Analysis 17-2 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. Explain the need for and limitations of financial statement
More informationFinancial Formulas. 5/2000 Chapter 3 Financial Formulas i
Financial Formulas 3 Financial Formulas i In this chapter 1 Formulas Used in Financial Calculations 1 Statements of Changes in Financial Position (Total $) 1 Cash Flow ($ millions) 1 Statements of Changes
More informationACCOUNTING FOR NON-ACCOUNTANTS
Deutsch and Chikarovski's ACCOUNTING FOR NON-ACCOUNTANTS A Question and Answer Handbook Robert Deutsch and Kris Chikarovski THE FEDERATION PRESS 2012 Preface - x Who is this book for? x What is in this
More informationFundamentals Level Skills Module, Paper F9
Answers Fundamentals Level Skills Module, Paper F9 Financial Management June 2009 Answers 1 (a) Weighted average cost of capital (WACC) calculation Cost of equity of KFP Co = 4 0 + (1 2 x (10 5 4 0)) =
More informationSEAGATE TECHNOLOGY PLC CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) June 28, ASSETS Current assets: Cash and cash equivalents $ 2,259 $ 1,708 Short-term investments 47 480 Restricted cash and investments 4 101 Accounts
More informationFINANCIAL PLANNING. anticipating possible problem before they arise. normally focuses on the big picture. Thus it is concerned with the major
FINANCIAL PLANNING A financial plan is a statement of what is to be done in the future. Most decisions have a long lead time, which means they take a long time to implement. Long range planning is a means
More informationFinancial Reporting and Analysis
Chartered Secretaries Qualifying Scheme Level 1 Financial Reporting and Analysis Sample paper Time allowed: 3 hours and 15 minutes (including reading time) Do not open this examination paper until the
More informationThis article illustrated deferred tax liabilities for a cash crop farm in west central Indiana. The
September 2014 Computation of Deferred Liabilities Michael Langemeier, Associate Director, Center for Commercial Agriculture This article is one of a series of financial management articles that will examine
More informationManagerial Accounting Prof. Dr. Varadraj Bapat Department of School of Management Indian Institute of Technology, Bombay
Managerial Accounting Prof. Dr. Varadraj Bapat Department of School of Management Indian Institute of Technology, Bombay Lecture - 18 Financial Statements Analysis Dabur India Case Dear students, in last
More informationFinancial Ratios and Quality Indicators
Financial Ratios and Quality Indicators From U.S. Small Business Administration Online Women's Business Center If you monitor the ratios on a regular basis you'll gain insight into how effectively you
More information