FINANCIAL STATEMENT ANALYSIS/RATIOS: PROB’S & DETAILED SOLUTIONS (copyright © 2012 Joseph W. Trefzger) This problem set covers all of our ratio analysis situations‚ with a general increase in degree of difficulty as we progress. Be sure that you have mastered the easier problems before moving ahead‚ because the more difficult examples tend to expand on the ideas presented in the easier ones. The last four problems are comprehensive‚ involving the interpretation of financial ratios that you compute
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IBM Corporation In the seven years (since 1994)‚ that Lou Gerstner reigned over IBM‚ the company’s earnings per share increased an average of 27% per year. This remarkable increase in earnings did not go unnoticed by the securities markets. Indeed‚ the company’s market value grew from less than $30 billion to over $200 billion during the period. Use the following financial statement data to: 1. Decompose IBM’s ROE (by quarter) and discuss the factors (and trends) that contribute to Big Blue’s profitability
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IBM Corporation In the seven years (since 1994)‚ that Lou Gerstner has reigned over IBM‚ the company’s earnings per share have increased an average of 27% per year. This remarkable increase in earnings‚ has not gone unnoticed by the securities markets. Indeed‚ the company’s market value has grown from less than $30 billion to over $200 billion during this period. Use the following financial statement data to: 1. Decompose IBM’s ROE and discuss the factors (and trends) that contribute to Big Blue’s
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19.5621 4.1822 2.0447 0.7339 3.5424 0.2947 0.1102 0.0538 0.1532 0.5171 73.2649 8.0492 4.2977 2.1276 0.6450 3.4198 0.2691 0.0754 0.0363 0.1091 0.2492 2001 2002 2003 2004 2005 EBIT/Sales EBT/EBIT 0.0514 0.1864 0.1280 0.6176 0.1102 0.7177 0.0754 0.7076 0.0465 0.6731 Analysis of ROE -5 Way NI/EBT Total Asset Turnover Debt Ratio 0.6794 1.3425 0.9300 0.6800 2.0658 0.8415 0.6800 2.0447 0.7339 0.6799 2.1276 0.6450 0.6801 2.1318 0.6454 2005 856.00 629.43 226.57 160.23 26.54 39.80 13.01 26
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issues—this ought to be presented in the context of a key reality: Hundreds of ‘‘evidenceless’’ treatments are being administered to patients (Kazdin‚ 2000)‚ and some evidence‚ although inconsistent‚ is clearly better than none. We do not advocate non-EBTs where EBTs are available. (2008). Utilizing an Evidence based program allows the Clinician to use a set of guidelines that was researched for treatment effectiveness. What is Evidence Based Treatment‚ according to Eliason‚ “Evidence-based practices are
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MANAGEMENT CONSULTANCY - Solutions Manual CHAPTER 18 LONG-TERM FINANCING DECISIONS I. Questions 1. Both operating and financial leverage imply that the firm will employ a heavy component of fixed cost resources. This is inherently risky because the obligation to make payments remains regardless of the condition of the company or the economy. 2. Debt can only be used up to a point. Beyond that‚ financial leverage tends to increase the overall costs of financing to the firm as well as
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15 EBIT = $1‚800‚000‚000. = 0.05 NI = $600‚000‚000. Now use the income statement format to determine interest so you can calculate the firm’s TIE ratio. EBIT $1‚800‚000‚000 See above. INT 800‚000‚000 EBT $1‚000‚000‚000 EBT = $600‚000‚000/0.6 Taxes (40%) 400‚000‚000 NI $ 600‚000‚000 See above. TIE = EBIT/INT = $1‚800‚000‚000/$800‚000‚000 = 2.25. 3-6 We are given ROA = 3% and Sales/Total assets = 1.5. From Du Pont equation: ROA = Profit
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CHAPTER 4 FINANCIAL PLANNING FOCUS We begin by explaining the nature of business planning and placing financial forecasting within that broader context. Once we get into financial planning we focus on exactly how to construct plans from physical assumptions about a business and its environment. Finally we look at some of the problems created when plans function as both goal statements and projections of what is most likely to happen in the future. PEDAGOGY This chapter
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CHAPTER 8 MAKING CAPITAL INVESTMENT DECISIONS Answers to Concept Questions 1. In this context‚ an opportunity cost refers to the value of an asset or other input that will be used in a project. The relevant cost is what the asset or input is actually worth today‚ not‚ for example‚ what it cost to acquire. 2. a. Yes‚ the reduction in the sales of the company’s other products‚ referred to as erosion‚ should be treated as an incremental cash flow. These lost sales are included because
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Chapter 3 Analysis of Financial Statements LEARNING OBJECTIVES After reading this chapter‚ students should be able to: • Explain why ratio analysis is usually the first step in the analysis of a company’s financial statements. • List the five groups of ratios‚ specify which ratios belong in each group‚ and explain what information each group gives us about the firm’s financial position. • State what trend analysis is‚ and why it is important. • Describe how
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