CHAPTER 3 ANALYSIS OF FINANCIAL STATEMENTS Please see the preface for information on the AACSB letter indicators (F‚ M‚ etc.) on the subject lines. True/False Easy: We tell our students (1) that to answer some of these questions it is useful to write out the relevant ratio or ratios‚ then think about how the ratios would change if the accounting data changed‚ and (2) that sometimes it is useful to make up illustrative data to help see what would happen. (3.1) Answe Ratio r: a analy sis EASY
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Cost of bonds (Rd) (1-.26)(2.503%) = 1.85% cost of bonds/ debt Does the company have any preferred stock? If so‚ calculate Rps Intel does not have any preferred stock. Estimate the cost of common stock Rs using CAPM (aka‚ the required return) http://finance.yahoo.com/bonds dividend and yield=4.20%(on yahoo finance summary for intel page) CAPM Rs=Rf+Beta(E(RM)-Rf) 10 year Treasury bond rate Rf= 1.81% Beta =0.98 10 year (2003-2013) arithmetic average of S&P500 = 5.69% MRP= 6.675 –
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Chapter 3 Problem 3 Operating Activities: Net Income $5‚560 Depreciation $4‚268 Change in Working Capital $1‚397 Cash from Operating Activities $11‚225 Investing Activities: Increased in Fixed Assets ($6‚068) Cash from Investing Activities ($6‚068) Financing Activities: Decrease in Debt ($7‚655) Dividends Paid ($2‚900) New Stock Sold $4‚800 Cash from Financing Activities ($5‚755) Net Cash Flow ($598) Beginning Cash Flow $3‚245 Net Cash Flow ($598) Ending Cash $2‚647 Problem
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up and throw away the key ’: a policy that won ’t work. " USA Today (Magazine) 126.n2630 (Nov 1997): 24(3). Student Edition. Gale. Library of Michigan. 14 Nov. 2007 <http://0-find.galegroup.com.elibrary.mel.org:80/itx/start.do?prodId=STOM>. Du Pont‚ Peter. "The Prison System Works." Opposing Viewpoints: America ’s Prisons. Ed. Roman Espejo. San Diego: Greenhaven Press‚ 2001. August 2004. 8 May 2006. <http://www.enotes.com/americas-prisons-article/41000>.
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Chem Med Case 1 Chem-Med Company 1. What was Chem-Med ’s rate of sales growth in 2003? What is it forecasted to be in 2004‚ 2005‚ and 2006? Sales Growth = (Sales this year - Sales last year)/Sales last year for 2003: ($ 3‚814 - $3‚051) / $3‚051 = + 25% for 2004: ($ 5‚340 - $3‚814) / $3‚814 = + 40% for 2005: ($ 7‚475 - $5‚340) / $5‚340 = + 40% for 2006: ($ 10‚466 - $7‚475) / $7‚475 = + 40% 2. What is the company ’s rate of net income growth in 2004‚2005‚ and 2006? Is projected net income
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analysis. D. scenario analysis. E. solvency analysis. 6. The formula which breaks down the return on equity into three component parts is referred to as which one of the following? A. equity equation B. profitability determinant C. SIC formula D. Du Pont identity E. equity performance formula 7. The U.S. government coding system that classifies a firm by the nature of its business operations is known as the: A. NASDAQ 100. B. Standard & Poor’s 500. C. Standard Industrial Classification code.
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The income statement has some limitations since it reflects accounting principles. For example‚ a company’s depreciation expense is based on the cost of the assets it has acquired and is using in its business. The resulting depreciation expense may not be a good indicator of the economic value of the asset being used up. To illustrate this point let’s assume that a company’s buildings and equipment have been fully depreciated and therefore there will be no depreciation expense for those buildings
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com/select_quote-category-Euthanasia-page-0.htm ) -"From the Soviet gulag to the Nazi concentration camps and the killing fields of Cambodia‚ history teaches that granting the state legal authority to kill innocent individuals has dreadful consequences." ... Pete Du Pont‚ former Delaware governor -"The fundamental question about euthanasia: Whether it is a libertarian movement for human freedom and the right of choice‚ or an aggressive drive to exterminate the weak‚ the old‚ and the different‚ this question can now
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people of business: 1. Owners 2. Managers 3.Employees 4.Consumers Owners: People‚ who own a business‚ as well as those who invest money in one‚ do so because thaw expects to earn a profit. Most of the giant corporations‚ such as General Motors‚ Du Pont and Exxon are owned by large numbers of people. When making decisions‚ the professional managers in business organizations need to consider the owners and what they expect from the business. Managers: the person responsible for operating the business
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Sir‚ To understand how the Basic Industries has achieved its return on equity over the past ten years‚ I have prepared Du Pont Analysis (Exhibit I). Return on Equity (without minority interest) has declined from 16.04% in 1985 to 17.47% in 1994. The main reason for the decline seems to be fall in Return on assets from 8.26% in 1985 to 6.87% in 1994. Therefore‚ Basic Industries has not been able to utilize its assets properly to produce its earnings. The fall in Return on Asset has been to an extent
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