# i have completed the work just need someone to check it and make corrections

Anonymous

### Question Description

if you do not completely understand accounting and business analysis please do not bid on this. I will tip very well on this assignment when it comes back graded and passed.

Anyhow--I have a number of documents including the existing work, the grader's comments so you know what needs to be fixed. Note that the grader's comments document includes the rubric and many important comments that MUST be addressed.

Current Ratio - Current Assets/Current Liabilities

Acid-Test Ratio - Cash + Short Term Investments + Acct. Rec. Net/Current Liabilities

Inventory Turnover - Cost of goods sold/Average Inventory

Accounts Receivable Turnover - Credit Sales/Average AR

Days Sales in Receivables ¿ 2 Step Process

Step 1 - Net Credit Sales/365 = One days sales

Step 2 - Average Net Accounts Receivable/One Days credit sales

Debt Ratio - Total Liabilities/Total Assets

Times-Interest Earned - Income from Operations/Interest Expense

Rate of Return on Net Sales - Net Income/Net Sales

Rate of Return on Total Assets - Net Income + Interest Expense/Average Total Assets

Rate of Return on Common Stockholder¿s Equity - Net Income-Preferred Dividends/Average Common Stockholder¿s Equity

Earnings per Share - Net Income - Preferred Dividends/Number of Shares of Common Stock Outstanding

Price Earnings Ratio - Market Price per Share/Earnings per Share

Book Value per Share of Common Stock - Stockholders Equity/Number of Shares of Common Stock Outstanding

this is the answer i completed

Can you please confirm calculations using the formulas above? The reason I ask is that I double checked a couple of the calculations. (This is because it's the last chance I have to get these assignments graded before the end of the term. It's really important this is correct and as you know, I've had problems.)

Anyway, I checked the following:

Rate of Return on Net Sales - Net Income/Net Sales

Rate of Return on Total Assets - Net Income + Interest Expense/Average Total Assets

My numbers I got don't match what you got. I got over 6% on Rate of Return on Net Sales and over 13% on Rate of Return on Total Assets. Now, I may be calculating these incorrectly somehow, so please do feel free to advise.

MEMORANDUM To: CEO G COMPANY From: Chief Accounting officer Date: 03 July 2014 Subject: Financial Analysis and recommendations Our finance team did a thorough accounting and finance audit and made the below findings. The report is based on the thirteen account ratios that show company trends and the ratios are benchmarked against the previous year. Current Ratio This liquidity ratio shows the firm’s ability to settle current liabilities. G Company is in a good position to settle current liabilities, as it has a current ratio of more than one. The ratio decreased from 1.86 in the previous fiscal year (FY) to 1.80 in the current FY. However, it is still effective. The industry average is 1, thus we can say when looking at this ratio that the company is doing a satisfactory job Acid Test Ratio In addition, this liquidity analysis ratio indicates the firm’s ability settle current financial obligations in its corporate financing. G Company has attained a fair acid test ratio of 0.48, which shows slight improvement from the previous FY. This indicates a growing strength in financial liquidity management; however, this should be improved to at least one. The industry average is 1, making 0.48 unsatisfactory. Inventory Turnover Ratio Inventory turnover ratio is important in terms of evaluating the company's stock management. A low inventory turnover points to possible obsolescence, overstocking, or deficiencies in the product line and marketing efforts. Increasing the inventory turnover is a key in driving profitability in thecompany. G Company has a fair inventory ratio of 3.3 in the current FY; however, this indicates a fall from the previous year. The company should strive to improve this ratio by adopting business best practices in marketing in order to improve the stock turnover ratio. At 3.3, the company is still effective in terms of industry average. Accounts Receivable Turnover This efficiency ratio indicates how the company turns accounts receivable to cash. It measures the effectiveness of the company in collecting accounts receivable. G Company should work on this area for better cash management. The ratio reduced from 32.2 in the previous FY to 25.3 in current FY, which indicates a decrease in accounts receivable collection. The industry average is 30%, which means G Company is not effective enough. Day’s Sales in Receivables This efficiency ratio that shows G Company's effectiveness in collecting accounts receivable on a daily basis. This ratio increased from 11.1 in previous FY to 13.0 in current FY. This shows some increase in effectiveness; however, the industry average is 10 days, meaning G Company lags behind. Debt Ratio Debt ratio is an important ratio in determining the financial leverage of the company. G Company has an impressive debt ratio of 41.68%, which shows a big level of financial stability. However, the ratio had a slight increase in the current FY; thus management should work on maintaining this ratio. The industry average is 70%, meaning this is one way G Company is doing an effective job Time Interest Earned Ratio This ratio is a metric used to measure the company’s ability to meet debt obligations. The interest payable to debt-holders depends on the ability of the company to sustain earnings. A high ratio indicates that a company has an undesirable lack of debt with earnings that could be used for other projects. G Company's ratio has increased tremendously and the company could cut on debt payment to finance investment projects. That said, the company is still in line with the industry average Rate of Return on Net Sales This profitability ratio shows what the return is on the net sales of the company. G Company's ratio has increased from 5.43% to 6.16% showing increase in how efficiently the company runs; however, there is room for improvement here--a better ratio would mean better profitability. Industry average is 7%, which indicates a need for improvement. Rate of Return on Total Assets In addition, this profitability ratio shows the productivity of total assets for a company. A higher ratio shows a higher efficiency in asset utilization. Company G has a low return on asset ratio of 12.44%; this is an increase from the previous year in which the company recorded a ratio of 12.30%. Therefore, there is underutilization of net assets in the G Company. The management of the company should strive to utilize available assets at G Company. Industry average is 15%, again indicating room for improvement. Rate of Return on Common Stockholders’ Equity This efficiency ratio examines the returns to the common stockholders. A higher ratio indicates better efficiency in the company. G Company has attained a ratio of 11.62, which is a decrease from the previous year where the company had a ratio of 20.20%. This shows a big decline. G Company should therefore try to increase overall productivity to increase shareholder wealth. Earnings per Share of Common Stock This is one of the most important variables in determining share price. A higher ratio indicates greater efficiency in the company's productivity. G Company has experienced an increase in this ratio, which indicates strength in the company. If this trend persists, it will bring more investors on board and will improve the future welfare of G Company. Price Earnings Ratio This ratio is important in stock valuation: stocks with a higher ratio forecasts growth in earnings and company strength. G Company experienced generous growth in this area. Book Value per Share of Common Stock G Company experienced slight growth in this ratio. That is from \$4.25 to \$4.716, which indicates somewhat of an increase in strength. Conclusion G Company has to keenly evaluate this analysis. Responding to each ratio will greatly improve efficiency in the company; however, priorities must also be in line with all G Company goals. Ultimately these efforts will increase the net worth of the company, and will help the company with its goal of increasing shareholder wealth. Bibliography Investopedia. (2014, Mar 12). Investopedia. Retrieved Aug 7, 2014, from investopedia.com: http://www.investopedia.com/terms/f/financial-analysis.asp
FNT1 Task 2 319.1.3-01-10, 2.1-04, 2.5-05 Capital Budgeting Student Template Revised May 8, 2011 B Student Name: Bambury Enter your first initial and last name in the fields above. Your Task 2 Data Years 1 & 2 Estimated Cash Receipts from tool sales each year. Estimated Cash Expenses for operations each year Initial Investment for equipment, etc. Marginal Tax Rate Restoration at the end of 8 years Working Capital required 3.000.000 2.400.000 3.000.000 28% 120.000 200.000 Years 3 & 4 3.200.000 2.400.000 Years 5 & 6 3.400.000 2.650.000 Entrepreneur D Net Cash Flow per Year Years 1 & 2 Years 3 & 4 Years 5 & 6 Years 7 & 8 Expected annual sales of new product 3.000.000 3.200.000 3.400.000 3.800.000 Expected annual costs of new product Cash expenses Depreciation expense Income before taxes Income tax at marginal rate Net income Net annual cash flow for years shown 2.400.000 347.500 600.000 -168.000 432.000 614.000 2.400.000 347.500 452.500 126.700 325.800 779.780 2.650.000 347.500 402.500 112.700 289.800 990.321 2.800.000 347.500 652.500 182.700 469.800 1.257.707 Net Present Value: Cash Flows 12% PV Factors Present Value Years 7 & 8 3.800.000 2.800.000 614.000 614.000 779.780 779.780 990.321 990.321 1.257.707 1.257.707 200.000 120.000 60.000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Working Capital return Salvage return Building restoration costs Total Investment Net Present Value 0,892857143 0,797193878 0,711780248 0,635518078 0,567426856 0,506631121 0,452349215 0,403883228 0,360610025 0,321973237 3,44191E-06 548.214 489.477 555.032 495.564 561.935 501.727 568.923 507.967 72.122 38.637 0 4.339.598 3.000.000 1.339.598 GRADERS: To provide for factor rounding, please allow plus or minus \$2000 on this net present value solution. Internal Rate of Return: Investment Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 + Working Capital + Salvage - Remodeling Cash Flows -3.000.000 614.000 614.000 779.780 779.780 990.321 990.321 1.257.707 1.637.707 22,101% Internal Rate of Return using Excel Payback Period: Net Cash Flow Time for Cash Flow to Payback Investment Investment Year 1 Year 2 Year 3 Year 4 Year 5 614000 614000 779780 779780 990321 -3000000 614000 614000 779780 779780 990321 Year 6 990321 990321 Year 7 1257707 Year 8 1257707 State your answer below in years and full months rounding up as necessary. 4 Accounting Rate of Return 44,49% Years 7 Months *Working Capital requirements are not part of this calculation. Initial X A B C D E F G H I J K Investment Work Cap Cash 1 Cash 2 Cash 3 Cash 4 Exp 1 Exp 2 Exp 3 3.000.000 210.000 3.200.000 3.600.000 3.800.000 3.700.000 2.500.000 2.800.000 3.200.000 3.250.000 220.000 3.100.000 3.400.000 3.600.000 3.240.000 2.400.000 2.600.000 2.700.000 3.000.000 200.000 3.000.000 3.200.000 3.400.000 3.800.000 2.400.000 2.400.000 2.650.000 2.940.000 250.000 3.400.000 3.500.000 3.700.000 3.470.000 2.800.000 2.850.000 2.900.000 2.900.000 180.000 2.940.000 3.160.000 3.240.000 3.600.000 2.200.000 2.500.000 2.600.000 2.850.000 200.000 3.200.000 3.600.000 3.800.000 3.600.000 2.500.000 2.800.000 3.400.000 2.900.000 300.000 3.170.000 3.240.000 3.470.000 3.930.000 2.400.000 2.500.000 2.750.000 2.800.000 180.000 3.000.000 3.200.000 3.600.000 3.470.000 2.300.000 2.600.000 2.800.000 2.820.000 180.000 3.000.000 3.200.000 3.600.000 3.800.000 2.300.000 2.600.000 2.800.000 2.450.000 260.000 3.750.000 3.860.000 3.930.000 3.240.000 3.100.000 3.300.000 3.400.000 3.100.000 300.000 3.170.000 3.240.000 3.470.000 3.600.000 2.400.000 2.500.000 2.750.000 2.840.000 200.000 3.200.000 3.600.000 3.800.000 3.700.000 2.500.000 2.800.000 3.400.000 L 2.950.000 180.000 2.940.000 3.260.000 3.240.000 3.470.000 2.200.000 2.500.000 2.600.000 M N O P Q R S T U V W Y Z 3.400.000 220.000 3.100.000 3.400.000 3.600.000 3.800.000 2.400.000 2.600.000 2.700.000 2.800.000 250.000 3.400.000 3.500.000 3.700.000 3.240.000 2.800.000 2.850.000 2.900.000 2.900.000 300.000 3.170.000 3.240.000 3.470.000 3.930.000 2.400.000 2.500.000 2.750.000 2.840.000 225.000 3.200.000 3.600.000 3.800.000 3.700.000 2.500.000 2.800.000 3.400.000 2.850.000 180.000 2.940.000 3.160.000 3.240.000 3.600.000 2.200.000 2.500.000 2.600.000 2.600.000 240.000 3.750.000 3.860.000 3.930.000 3.700.000 3.100.000 3.250.000 3.300.000 2.800.000 260.000 3.750.000 3.860.000 3.930.000 3.470.000 3.100.000 3.000.000 3.400.000 2.840.000 225.000 3.200.000 3.600.000 3.800.000 3.700.000 2.500.000 2.800.000 3.400.000 2.900.000 250.000 3.400.000 3.500.000 3.700.000 3.800.000 2.800.000 2.850.000 2.900.000 2.800.000 300.000 3.170.000 3.240.000 3.470.000 3.400.000 2.400.000 2.500.000 2.750.000 2.900.000 200.000 3.000.000 3.200.000 3.400.000 3.400.000 2.400.000 2.400.000 2.650.000 2.750.000 200.000 3.100.000 3.200.000 3.400.000 3.360.000 2.600.000 2.500.000 2.500.000 2.750.000 200.000 3.000.000 3.200.000 3.200.000 3.400.000 2.400.000 2.400.000 2.650.000 Exp 4 Tax Rate Restoration 2.700.000 2.900.000 30% 120.000 2.800.000 2.500.000 25% 140.000 2.580.000 2.800.000 28% 120.000 2.480.000 2.500.000 22% 140.000 2.500.000 2.600.000 30% 160.000 2.700.000 2.600.000 25% 130.000 2.600.000 3.300.000 32% 150.000 2.570.000 2.500.000 32% 160.000 2.570.000 2.800.000 32% 160.000 2.140.000 2.500.000 30% 190.000 2.600.000 2.600.000 32% 150.000 2.700.000 2.850.000 25% 130.000 2.500.000 2.500.000 30% 160.000 2.800.000 2.700.000 25% 140.000 2.480.000 2.500.000 22% 140.000 2.600.000 3.300.000 32% 150.000 2.700.000 2.850.000 26% 130.000 2.500.000 2.600.000 30% 160.000 2.140.000 2.650.000 30% 190.000 2.140.000 2.500.000 30% 190.000 2.800.000 2.950.000 28% 160.000 2.480.000 2.800.000 22% 140.000 2.600.000 2.400.000 32% 150.000 2.580.000 2.400.000 28% 120.000 2.700.000 2.600.000 28% 120.000 2.580.000 2.500.000 28% 120.000 2.580.000
CASH BUDGETING ANALYSIS 1 Cash Budgeting Analysis Beverly Bambury FNT1 Western Governors University 10 August 2014 CASH BUDGETING ANALYSIS 2 CAPITAL BUDGETINGING ANALYSIS PART B. Part 1 CASH FLOW FOR YEAR 2. Amount (\$) Sale revenue \$3,000,000 0perating expense \$2,400,000 Profit before tax \$600,000 Less tax (\$168,000) Net earning \$432,000 Ignoring the depreciation expense in year two greatly reduces the net cash flow for the year. The net cash flow reduces from \$529,500 to \$432,000. This is because depreciation expense reduce the earnings before tax, therefore less tax is required. Ignoring depreciation expenses increases tax from \$70,000 to \$168,000, which explains the difference in the cash flows. Part 2 With respect to the net present value (NPV) analysis it evident that the project has a positive NPV. This is the present value of future revenue, which exceeds the initial investment by \$1,339,598. This shows that the project is more profitable than investing in the initial capital in bank deposit at 12% interest rate. Therefore, Entrepreneur D should invest in this project. The CASH BUDGETING ANALYSIS 3 project attains the business goal of maximizing shareholder wealth, as it is more profitable than the opportunity cost. Part 3 Based on the accounting rate of return(ARR) analysis the project has an internal rate of return of 22.101%. This is a higher return compared to the opportunity cost of investing in bank deposit with the prevailing interest rates of 12%. This means that Entrepreneur D, should take this option has it maximizes future returns, which of course speaks to the business goal of shareholder wealth maximization. Part 4 In this analysis the ARR differs from the internal rate of return (IRR). This is because the ARR does not consider the time preference of money; hence, future cash flows are not discounted. The internal rate of return IRR utilizes the concept of time preference of money, where cash flows are discounted according to time, which explains the disparity between the ARR and IRR. Part 5 Payback period is very important in this analysis, as it an effective measure of investment risk. The project with a lesser payback period is often considered less risky. Payback period also measures liquidity of a project alternative (Brealey & Myrey 2004).Therefore, payback analysis in this capital budgeting analysis is equally important. Part 6 Weighted average of cost of capital (WACC) is a calculation in which each category of capital is proportionately weighted. All the available sources of capital are proportionately weighted CASH BUDGETING ANALYSIS 4 (Brealey & Myrey 2004). The weighted average cost of capital should be used when selecting and valuing investment opportunities. Using the NPV analysis the WACC can be used to discount future cash flows and determine worthy investment opportunities. The net present of future cash inflows should be higher than the present value of capital for the business to make positive returns. Part 7 The WACC can also be effectively used in capital budgeting decisions using the IRR. The WACC will give the minimum amount at which the company produces value for investors (Johnson, 1970). Therefore using the internal rate of return, we can adequately compare different investment portfolios and benchmark them against the WACC. CASH BUDGETING ANALYSIS 5 References Brealey, R. A., Myers, S. C., & Marcus, A. J. (2004).Essentials of coporate finance. Boston, Mass.: McGraw-Hill. Johnson, R. W. (1970). Capital budgeting. Belmont, Calif.: Wadsworth Pub. Co.
CASH BUDGETING ANALYSIS 1 Cash Budgeting Analysis Beverly Bambury FNT1 Western Governors University 10 August 2014 CASH BUDGETING ANALYSIS 2 CAPITAL BUDGETINGING ANALYSIS PART B. Part 1 CASH FLOW FOR YEAR 2. Amount (\$) Sale revenue \$3,000,000 0perating expense \$2,400,000 Profit before tax \$600,000 Less tax (\$168,000) Net earning \$432,000 Ignoring the depreciation expense in year two greatly reduces the net cash flow for the year. The net cash flow reduces from \$529,500 to \$432,000. This is because depreciation expense reduce the earnings before tax, therefore less tax is required. Ignoring depreciation expenses increases tax from \$70,000 to \$168,000, which explains the difference in the cash flows. Part 2 With respect to the net present value (NPV) analysis it evident that the project has a positive NPV. This is the present value of future revenue, which exceeds the initial investment by \$1,339,598. This shows that the project is more profitable than investing in the initial capital in bank deposit at 12% interest rate. Therefore, Entrepreneur D should invest in this project. The CASH BUDGETING ANALYSIS 3 project attains the business goal of maximizing shareholder wealth, as it is more profitable than the opportunity cost. Part 3 Based on the accounting rate of return(ARR) analysis the project has an internal rate of return of 22.101%. This is a higher return compared to the opportunity cost of investing in bank deposit with the prevailing interest rates of 12%. This means that Entrepreneur D, should take this option has it maximizes future returns, which of course speaks to the business goal of shareholder wealth maximization. Part 4 In this analysis the ARR differs from the internal rate of return (IRR). This is because the ARR does not consider the time preference of money; hence, future cash flows are not discounted. The internal rate of return IRR utilizes the concept of time preference of money, where cash flows are discounted according to time, which explains the disparity between the ARR and IRR. Part 5 Payback period is very important in this analysis, as it an effective measure of investment risk. The project with a lesser payback period is often considered less risky. Payback period also measures liquidity of a project alternative (Brealey & Myrey 2004).Therefore, payback analysis in this capital budgeting analysis is equally important. Part 6 Weighted average of cost of capital (WACC) is a calculation in which each category of capital is proportionately weighted. All the available sources of capital are proportionately weighted CASH BUDGETING ANALYSIS 4 (Brealey & Myrey 2004). The weighted average cost of capital should be used when selecting and valuing investment opportunities. Using the NPV analysis the WACC can be used to discount future cash flows and determine worthy investment opportunities. The net present of future cash inflows should be higher than the present value of capital for the business to make positive returns. Part 7 The WACC can also be effectively used in capital budgeting decisions using the IRR. The WACC will give the minimum amount at which the company produces value for investors (Johnson, 1970). Therefore using the internal rate of return, we can adequately compare different investment portfolios and benchmark them against the WACC. CASH BUDGETING ANALYSIS 5 References Brealey, R. A., Myers, S. C., & Marcus, A. J. (2004).Essentials of coporate finance. Boston, Mass.: McGraw-Hill. Johnson, R. W. (1970). Capital budgeting. Belmont, Calif.: Wadsworth Pub. Co.
MEMORANDUM To: CEO G COMPANY From: Chief Accounting officer Date: Subject: Financial Analysis and recommendations. Our finance team did a thorough accounting and finance audit and made the below findings. The report is based on the thirteen account ratios that show company trends and the ratios are benchmarked against the previous year. Current Ratio This liquidity ratio shows the firm’s ability to settle current liabilities. G Company is in a good position to settle current liabilities it has a current ratio of more than one. The ratio has also improved from 1.86 in in the previous fiscal year (FY) to 1.96 in the current FY. This indicates growing strength in the company. Acid Test Ratio In addition, this liquidity analysis ratio indicates the firm’s ability settle current financial obligations in the corporate financing. G Company has attained a fair Acid Test ratio of 0.67, which shows the slight improvement from the previous FY. This indicates a growing strength in the financial liquidity management; however, this should be improved to at least one. Inventory Turnover Ratio Inventory turnover ratio is also an important ratio in evaluating the stock in the management in the company. A low inventory turnover points to possible obsolescence, overstocking, or deficiencies in the product line and marketing efforts. Increasing the inventory turnover is the key in driving profitability in the company. G Company has a fair inventory ratio of 5.1 in the current FY; however, this indicates a fall from the previous year. The company should strive to better this ratio by adopting business best practices in the marketing effort to increase the stock turnover ratio. Accounts Receivable Turnover This is an activity or efficiency that shows how the company turns account receivables to cash. This ratio measures the effectiveness of the company in collecting accounts receivable. G Company should work on this area for better cash management. The ratio reduced from 32.2 in the previous FY to 27.3 in current FY, which indicates a decrease in accounts receivables collection. Day’s Sales in Receivables This efficiency or activity ratio that shows G Company's effectiveness in collecting accounts receivable on a daily basis. This ratio increased from 11.1 in previous FY to 13.0 in current FY. This shows some effectiveness in the collecting accounts receivables. However, the company should work to increase this ratio to improve the financial future of the company. Debt Ratio Debt ratio is an important ratio in determining the financial leverage of the company. G Company has an impressive debt ratio of 29.94, which shows a big level of financial stability. However, the ratio had a slight increase in the current FY; thus, the management should work on maintaining this ratio. Time Interest Earned Ratio: This is an important metric used to measure the company’s ability to meet debt obligations. The interest payable to debt holders depends on the ability of the company to sustain earnings. A high ratio indicates that a company has an undesirable lack of debt with earnings that could be used for other projects. G Company's ratio has increased tremendously and the company could cut on debt payment to finance investment projects. Rate of Return on Net Sales: This profitability ratio shows what the return is on the net sales of the company. This shows the company's efficiency. G Company's ratio has increased from 5.43% to 9.94% showing increase in how efficiently the company runs; however, there is room for improvement here--a better ration would mean better profitability. Rate of Return on Total Assets In addition, this profitability ratio shows the productivity of total assets in the corporate. A higher ratio shows a higher efficiency in asset utilization in company. Company G has a low return on asset ratio of 9.94%; this is a decrease from the previous year where the company recorded a ratio of 12.30%. Therefore, there is underutilization of net assets in the G Company. The management of the company should strive effectively to utilize the asset available at G Company. Rate of Return on Common Stockholders’ Equity In addition, this efficiency ratio examines the returns to the common stockholders. A higher ratio indicates better efficiency in the company. G Company has attained a ratio of 11.62, which is a decrease from the previous year where the company had a ratio of 20.20%. This shows a big decline in the ratio. The company should therefore try to increase the productivity of the company to increase the shareholders' wealth. Earnings per Share of Common Stock: This is one of the most important variables in determining the price of the shares. A higher ratio indicates greater efficiency in the production of the company. G Company has experienced an increase in this ratio, which indicates strength in the company. If this trend persists, it will bring more investors on board and will improve the future welfare of G Company. Price Earnings Ratio This ratio is important in stock valuation: stocks with higher ratio forecasts earnings growth. A higher ratio indicates strength in the company. G Company experienced tremendous growth in this area. Book Value per Share of Common Stock G Company also experienced slight growth in this ratio. That is from \$4.25 to \$4.716, which indicates a growing strength in the company. Conclusion G Company has to keenly evaluate the analysis. Responding to each ratio will greatly improve the efficiency in the company; however, priorities must also be in line with all G Company goals. Ultimately these efforts will greatly increase the net worth of the company, and will be in line with the goal of increasing shareholder wealth.
FNT1 Task 1 319.1.2-01-10, 2.1-01-03 Financial Statement Analysis Student Template Revised April 12, 2011 B Bambury First Initial Last Name Select your first initial from the drop down menu and enter your last name in the field above. Student Name: Company G Comparative Income Statements December 31, Years 12 and 11 NET SALES Cost of Merchandise Sold GROSS PROFIT Operating Expenses: Selling and Store Operating Pre-Opening General and Administrative Total Operating Expenses OPERATING INCOME Interest Income (Expense): Interest Income Less: Interest Expense Interest, net EARNINGS BEFORE INCOME TAXES Provision for Income Taxes NET EARNINGS Horizontal Analysis Change % Inc (Dec) 11,178,375 903.00% 6,543,803 7.57% 4,634,573 12.43% Year 12 134,886,375 92,952,803 41,933,573 Year 11 123,708,000 86,409,000 37,299,000 25,827,000 222000 2,316,000 28,365,000 13,568,573 23,478,000 267000 2,163,000 25,908,000 11,391,000 2,349,000 45,000 153,000 2,457,000 2,177,573 10.01% 20.27% 7.07% 9.48% 19.12% 183000 384000 -201000 13,367,573 117000 366000 -249000 11,142,000 66,000 18,000 -48,000 2,225,573 56.41% 4.92% -19.27% 1997.00% 5,052,000 8,315,573 4,419,000 6,723,000 663,000 1,592,573 15.00% 23.67% Company G Comparative Balance Sheets December 31, Years 12 and 11 Year 12 ASSETS Current Assets: Cash and Cash Equivalents Short-Term Investments Accounts Receivable, net Merchandise Inventory Other Current Assets Total Current Assets Property and Equipment, at cost: Land Buildings Furniture, Fixtures and Equipment Less Accumulated Depreciation Net Property and Equipment TOTAL ASSETS LIABILITIES Current Liabilities: Accounts and Notes Payable Accrued Salaries and Related Expense Sales and Income Taxes Payable Other Accrued Expenses Total Current Liabilities Long-Term Liabilities: Notes Payable Other Long-Term Liabilities Total Long-Term Liabilities Year 11 4,050,000 36,000 2,638,000 20,503,000 688000 27,915,000 5,562,000 162,000 2,686,000 15,534,000 393000 24,337,000 1,512,000 -126,000 -48,000 4,969,000 295,000 3,578,000 37.33% -77.78% 1.79% 31.99% 75.00% 14.70% 12,843,000 24,933,000 9,411,000 47,187,000 8,235,000 38,952,000 66,867,000 11,484,000 21,939,000 7,860,000 41,283,000 6,360,000 34,923,000 59,260,000 1,359,000 2,994,000 1,551,000 5,904,000 1,875,000 4,029,000 7,607,000 11.83% 13.65% 19.73% 14.30% 29.48% 11.54% 12.84% 9,800,000 1,869,000 1,233,000 2,619,000 15,521,000 7,938,000 1,656,000 1,290,000 2,166,000 13,050,000 1,862,000 213,000 57,000 453,000 2,471,000 23.46% 12.86% 4.62% 20.91% 18.93% 3,051,000 1,134,000 4,185,000 2,889,000 858000 3747000 162,000 276,000 438,000 5.61% 32.17% 11.69% Total Liabilities STOCKHOLDERS' EQUITY: Common Stock (\$1.00 Par) Paid In Capital Retained Earnings Treasury Stock (2,000,000 shares, at cost) Total Stockholders' Equity TOTAL LIABILITIES and EQUITY 19,706,000 16,797,000 2,909,000 17.32% 10,000,000 13,530,000 28,251,000 -4,620,000 47,161,000 66,867,000 10,000,000 12,501,000 19,962,000 0 42,463,000 59,260,000 0 1,029,000 8,289,000 -4,620,000 4,698,000 7,606,000 0.00% 8.23% 41.52% 0 11.06% 1284.00% Below data is used for drop down box. DO NOT REMOVE. Select Option: Strength Weakness No Concern A B C D E F G H I J K L M N O P Q R S T U V W X Y Z he field above. The below rules are from Financial Accounting Principles , Wild, 18th ed. This column is not graded. It is provided for students to use as they analyze the ratios for the essay. ↑↑↑ Apply the above mathematics rules to your work in this task. Enter --- in the answer field when appropriate. Ratio Analysis: Company G Year 12 Year 11 Quartile Industry Data Ratio: 3.1 Select Strength, Weakness, or No Concern 1.93 1.86 Acid-Test Ratio 0.67 0.64 1.6 0.9 0.6 5.1 6.1 13 10.2 8.3 Weakness 32.2 35.2 33.5 31.4 Weakness 11.1 15.1 13.5 11.3 Weakness 28.34% 30.0% 45.0% 66.0% Weakness 31.12 29.7 17.2 8.1 Weakness Inventory Turnover Accounts Receivable Turnover 27.3 (This formula in Horngren only includes credit sales) Day's Sales in receivables 13.0 (Horngren reference includes all sales. Modify the formula to use only credit sales. Cash sales are already collected.) Debt Ratio Times-interest-earned ratio 29.94% 67.50 2.1 1.4 Strength Current Ratio Rate of return on net sales 9.94% 5.43% 7.55% 6.12% 4.20% Rate of return on total assets 9.94% 12.30% 17.20% 12.30% 8.60% Strength Strength Weakness Rate of return on common stockholder's equity 11.62% 20.20% 18.60% 16.30% 12.80% Weakness Earnings per share of common stock 0.3695 \$0.672 0.9 0.87 0.83 Weakness Price earnings ratio 15.557 \$5.21 7 6.3 5.5 Strength 4.716 \$4.25 6 5.5 4.9 Strength Book value per share of common stock
CASH BUDGETING ANALYSIS 1 Cash Budgeting Analysis Beverly Bambury FNT1 Western Governors University 12 July 2014 CASH BUDGETING ANALYSIS 2 CAPITAL BUDGETINGING ANALYSIS PART B. Part 1 CASH FLOW FOR YEAR 2. Amount (\$) Sale revenue \$3,000,000 0perating expense \$2,400,000 Profit before tax \$600,000 Less tax (\$168,000) Net earning \$432,000 Ignoring the depreciation expense in year two greatly reduces the net cash flow in the year. The net cash flow reduces from \$529,500 to \$432,000. This is because depreciation expense reduces the earnings before tax, therefore less tax is required. Ignoring depreciation expenses increases tax from \$70,000 to \$168,000. This explains the difference in the cash flows. Part 2 With respect to the net present value (NPV) analysis it evident that the project has a positive NPV. This is the present value of future revenue, which exceeds the initial investment by \$340,006. This shows that the project is more profitable than investing in the initial capital in bank deposit at 12% interest rate. Therefore, Entrepreneur D should invest in this project. The CASH BUDGETING ANALYSIS 3 project attains the business goal of maximizing shareholder wealth, as it is more profitable than the opportunity cost. Part 3 Based on the accounting rate of return (ARR) analysis the project has an internal rate of return of 14.817%. This is a higher return compared to the opportunity cost of investing in bank deposit with the prevailing interest rates of 12%. This means that Entrepreneur D, should take this option has it maximizes future returns, which of course speaks to the business goal of shareholder wealth maximization. Part 4 In this analysis the ARR differs from the internal rate of return (IRR). This is because the ARR does not consider the time preference of money; hence, future cash flows are not discounted. The internal rate of return IRR utilizes the concept of time preference of money, where cash flows are discounted according to time, which explains the disparity between the ARR and IRR. Part 5 Payback period is very important in this analysis, as it an effective measure of investment risk. The project with a lesser payback period is often considered less risky. Payback period also measures liquidity of a project alternative (Brealey & Myrey 2004). Therefore, payback analysis in this capital budgeting analysis is equally important. Part 6 Weighted average of cost of capital (WACC) is a calculation in which each category of capital is proportionately weighted. All the available sources of capital are proportionately weighted CASH BUDGETING ANALYSIS 4 (Brealey & Myrey 2004). The weighted average cost of capital should be used when selecting and valuing investment opportunities. Using the NPV analysis the WACC can be used to discount future cash flows and determine worthy investment opportunities. The net present of future cash inflows should be higher than the present value of capital for the business to make positive returns. Part 7 The WACC can also be effectively used in capital budgeting decisions using the IRR. The WACC will give the minimum amount at which the company produces value for investors (Johnson, 1970). Therefore using the internal rate of return, we can adequately compare different investment portfolios and benchmark them against the WACC. CASH BUDGETING ANALYSIS 5 References Brealey, R. A., Myers, S. C., & Marcus, A. J. (2004). Essentials of coporate finance. Boston, Mass.: McGraw-Hill. Johnson, R. W. (1970). Capital budgeting. Belmont, Calif.: Wadsworth Pub. Co.
FNT1 Task 2 319.1.3-01-10, 2.1-04, 2.5-05 Capital Budgeting Student Template Revised May 8, 2011 B Student Name: Bambury Enter your first initial and last name in the fields above. Your Task 2 Data Years 1 & 2 Estimated Cash Receipts from tool sales each year. Estimated Cash Expenses for operations each year Initial Investment for equipment, etc. Marginal Tax Rate Restoration at the end of 8 years Working Capital required 3.000.000 2.400.000 3.000.000 28% 120.000 200.000 Years 3 & 4 3.200.000 2.400.000 Years 5 & 6 3.400.000 2.650.000 Entrepreneur D Net Cash Flow per Year Years 1 & 2 Years 3 & 4 Years 5 & 6 Years 7 & 8 Expected annual sales of new product 3.000.000 3.200.000 3.400.000 3.800.000 Expected annual costs of new product Cash expenses Depreciation expense Income before taxes Income tax at marginal rate Net income Net annual cash flow for years shown 2.400.000 347.500 252.500 70.500 182.000 529.500 2.400.000 347.500 452.500 126.700 325.800 673.500 2.650.000 347.500 402.500 112.700 289.800 637.300 2.800.000 347.500 652.500 182.700 469.800 817.300 Net Present Value: Cash Flows 12% PV Factors Present Value Years 7 & 8 3.800.000 2.800.000 529.500 529.500 673.500 673.500 637.300 637.300 817.300 817.300 200.000 120.000 60.000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Working Capital return Salvage return Building restoration costs Total Investment Net Present Value 0,8929 0,7972 0,7118 0,6355 0,5674 0,5066 0,4523 0,4039 0,4039 0,4039 0,4039 472.790 422.117 479.397 428.009 361.604 322.856 369.644 330.107 80.780 48.468 24.234 3.340.006 3.000.000 340.006 GRADERS: To provide for factor rounding, please allow plus or minus \$2000 on this net present value solution. Internal Rate of Return: Investment Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 + Working Capital + Salvage - Remodeling Cash Flows -3.000.000 529.500 529.500 673.500 673.500 637.300 637.300 817.300 1.197.300 14,817% Internal Rate of Return using Excel Payback Period: Net Cash Flow Time for Cash Flow to Payback Investment Investment Year 1 Year 2 Year 3 Year 4 Year 5 529500 529500 673500 673500 637300 -3000000 529500 529.500 673500 673500 637300 Year 6 637300 594000 Year 7 817300 Year 8 1197300 State your answer below in years and full months rounding up as necessary. 6 Accounting Rate of Return 44,49% Years 11 Months *Working Capital requirements are not part of this calculation. Initial X A B C D E F G H I J K Investment Work Cap Cash 1 Cash 2 Cash 3 Cash 4 Exp 1 Exp 2 Exp 3 3.000.000 210.000 3.200.000 3.600.000 3.800.000 3.700.000 2.500.000 2.800.000 3.200.000 3.250.000 220.000 3.100.000 3.400.000 3.600.000 3.240.000 2.400.000 2.600.000 2.700.000 3.000.000 200.000 3.000.000 3.200.000 3.400.000 3.800.000 2.400.000 2.400.000 2.650.000 2.940.000 250.000 3.400.000 3.500.000 3.700.000 3.470.000 2.800.000 2.850.000 2.900.000 2.900.000 180.000 2.940.000 3.160.000 3.240.000 3.600.000 2.200.000 2.500.000 2.600.000 2.850.000 200.000 3.200.000 3.600.000 3.800.000 3.600.000 2.500.000 2.800.000 3.400.000 2.900.000 300.000 3.170.000 3.240.000 3.470.000 3.930.000 2.400.000 2.500.000 2.750.000 2.800.000 180.000 3.000.000 3.200.000 3.600.000 3.470.000 2.300.000 2.600.000 2.800.000 2.820.000 180.000 3.000.000 3.200.000 3.600.000 3.800.000 2.300.000 2.600.000 2.800.000 2.450.000 260.000 3.750.000 3.860.000 3.930.000 3.240.000 3.100.000 3.300.000 3.400.000 3.100.000 300.000 3.170.000 3.240.000 3.470.000 3.600.000 2.400.000 2.500.000 2.750.000 2.840.000 200.000 3.200.000 3.600.000 3.800.000 3.700.000 2.500.000 2.800.000 3.400.000 L 2.950.000 180.000 2.940.000 3.260.000 3.240.000 3.470.000 2.200.000 2.500.000 2.600.000 M N O P Q R S T U V W Y Z 3.400.000 220.000 3.100.000 3.400.000 3.600.000 3.800.000 2.400.000 2.600.000 2.700.000 2.800.000 250.000 3.400.000 3.500.000 3.700.000 3.240.000 2.800.000 2.850.000 2.900.000 2.900.000 300.000 3.170.000 3.240.000 3.470.000 3.930.000 2.400.000 2.500.000 2.750.000 2.840.000 225.000 3.200.000 3.600.000 3.800.000 3.700.000 2.500.000 2.800.000 3.400.000 2.850.000 180.000 2.940.000 3.160.000 3.240.000 3.600.000 2.200.000 2.500.000 2.600.000 2.600.000 240.000 3.750.000 3.860.000 3.930.000 3.700.000 3.100.000 3.250.000 3.300.000 2.800.000 260.000 3.750.000 3.860.000 3.930.000 3.470.000 3.100.000 3.000.000 3.400.000 2.840.000 225.000 3.200.000 3.600.000 3.800.000 3.700.000 2.500.000 2.800.000 3.400.000 2.900.000 250.000 3.400.000 3.500.000 3.700.000 3.800.000 2.800.000 2.850.000 2.900.000 2.800.000 300.000 3.170.000 3.240.000 3.470.000 3.400.000 2.400.000 2.500.000 2.750.000 2.900.000 200.000 3.000.000 3.200.000 3.400.000 3.400.000 2.400.000 2.400.000 2.650.000 2.750.000 200.000 3.100.000 3.200.000 3.400.000 3.360.000 2.600.000 2.500.000 2.500.000 2.750.000 200.000 3.000.000 3.200.000 3.200.000 3.400.000 2.400.000 2.400.000 2.650.000 Exp 4 Tax Rate Restoration 2.700.000 2.900.000 30% 120.000 2.800.000 2.500.000 25% 140.000 2.580.000 2.800.000 28% 120.000 2.480.000 2.500.000 22% 140.000 2.500.000 2.600.000 30% 160.000 2.700.000 2.600.000 25% 130.000 2.600.000 3.300.000 32% 150.000 2.570.000 2.500.000 32% 160.000 2.570.000 2.800.000 32% 160.000 2.140.000 2.500.000 30% 190.000 2.600.000 2.600.000 32% 150.000 2.700.000 2.850.000 25% 130.000 2.500.000 2.500.000 30% 160.000 2.800.000 2.700.000 25% 140.000 2.480.000 2.500.000 22% 140.000 2.600.000 3.300.000 32% 150.000 2.700.000 2.850.000 26% 130.000 2.500.000 2.600.000 30% 160.000 2.140.000 2.650.000 30% 190.000 2.140.000 2.500.000 30% 190.000 2.800.000 2.950.000 28% 160.000 2.480.000 2.800.000 22% 140.000 2.600.000 2.400.000 32% 150.000 2.580.000 2.400.000 28% 120.000 2.700.000 2.600.000 28% 120.000 2.580.000 2.500.000 28% 120.000 2.580.000

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