the needs of the company. LA ’s credit policy is too lenient‚ and there is no money coming into the company. The company ’s working capital minimum requirements are not being achieved. In addition‚ it has a direct effect on the LA ’s cash conversion cycle because cash is constantly paid for materials but not collected from receivables. LA will need to implement a credit policy that is more stringent than the current one. A company ’s credit policy is based on: How long a customer is given
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Analysis pg3 Vertical/Common Size Analysis pg3 Major Elements of Cash Flow pg4 Cash Flow Comparison for 3 restaurants pg4 Comparison of Net Income pg 4 Comparison of Net Cash Flow from Operating Activities pg 5 Comparison of Net Cash Flow from Investing Activities pg 5 Comparison of Net Cash Flow from Financing Activities pg 5 Comparison of Net Change in Cash pg 6 Comparison of Free Cash Flow pg 6 Horizontal Analysis pg 6 Horizontal Analysis
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tricky. The principle is to find the market price of comparables or substitutes. Perspectives: Using the text example (page 257)‚ the basic idea behind capital budgeting is to ‘add value’. After including all of the costs (cash outflows) and revenues (cash inflows)‚ value is added if the present value of inflows is greater than the present value of outflows. Although this point may seem rather obvious‚ it is often helpful to stress the word "Net" in Net Present Value. It is not uncommon
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West Lake Home Furnishings Ltd. Written Analysis and Communication - II Instructor Submitted by Section- D 2/08/2008 Date: May 30‚ 2007 To: Charles Bowman‚ CEO‚ West Lake Home Furnishings Ltd.‚ Ontario‚ Toronto. From Subject: Advice on whether to accept the offer of reducing the price of signature product to $29.99 for a year. This report is a summary and analysis of current situation on West Lake Home Furnishings Ltd. (WLHFL) The analysis is based upon the basic objective
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CHAPTER 4 FREE CASH FLOW VALUATION LEARNING OUTCOMES After completing this chapter‚ you will be able to do the following : • Define and interpret free cash flow to the firm (FCFF) and free cash flow to equity (FCFE). • Describe‚ compare‚ and contrast the FCFF and FCFE approaches to valuation. • Contrast the ownership perspective implicit in the FCFE approach to the ownership perspective implicit in the dividend discount approach. • Discuss the appropriate adjustments to net income‚ earnings
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Corporation A based on a 5 year projected income statement and cash flow statement as well as each Corporation’s NPV and IRR. The net present value represents the project adds to shareholder wealth. The net present value is also the present value of future cash returns. In order to find the net present value‚ the present value of cash flows and sum of discounted cash flows has to be determined. Finding the present value of cash flows includes the revenue minus the expenses‚ depreciation‚ and
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Practice for Lecture 1: Basic Financial Analysis Question 1. Consider the following financial statements for SubMart Corp contained in the company’s most recent annual report filed with the OSC. SubMart Corp Balance Sheet‚ December 31‚ 2012 Assets Cash Accounts receivable Inventories Property‚ plant & equipment Less accumulated depreciation Total assets Liabilities & Equity Accounts payable Accrued expenses payable Long-term debt Common stock Retained earnings Total liabilities and equity 2010 2011
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1/20/2013 MACC 594: LECTURE NOTES‚ MODULE I: INTRODUCTION TO ANALYSIS AND REVIEW OF BASIC CONCEPTS PART I. A. REVIEW OF FINANCIAL STATEMENTS ANALYZING THE BALANCE SHEET • The balance sheet lists the firm’s assets‚ liabilities and equity accounts and their balances at the end of the period. • What does the balance sheet reveal about a firm? • Size of the company (total assets or net assets) • Major assets owned and proportion of current vs. noncurrent assets: - Is the mix of assets consistent
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Credit a Cash A/c Sanjay A/c Real Personal Cash (Cheque) is coming in Sanjay is the giver Debit Credit b Ramu A/c Bank A/c Personal Personal Ramu is the receiver Bank is the giver Debit Credit c Salary A/c Cash A/c Nominal Real Salary is an expense Cash is going out Debit Credit d Rent A/c Bank A/c Nominal Personal Rent is an expense Bank is the giver Debit Credit e Drawings A/c Purchase A/c Personal Nominal Owner is the receiver Decrease in Stock Debit Credit f Advance to Supplier A/c Cash A/c Personal
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its debt structure‚ we can see in the forecast that the net cash flow will be negative and ratios like ROE will keep decreasing in several years‚ which means that profitability of this company is going down. And also‚ Padgett Paper’s cash flow and net income will become more and more hardly to repay the short-term notes and the interests. Analysis The core of these problems is how to increase the net cash flow. From the cash flow statement‚ we can find at least 3 methods: reducing the accounts
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