Debt Policy at UST 1. How well is UST doing? * UST has been doing extremely well. Revenues and earnings are growing at 9% and 11% respectively. * Named by Forbes as one of the top companies in terms of profitability. ROC‚ ROE and GPM one of the industry highest. * Paying back generous dividends of $2.2b and repurchasing $2b from 1988 to 1998. * However‚ they seem to be losing market share in the premium market to competitors and have not been able to make an impact in the
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UST Case Study Steven Kinyon Phillip LeCheminant Ryan Makahilahila 1. UST has a long history of conservative debt policy. Briefly describe why UST is considering a recapitalization that involves issuing debt and repurchasing equity. UST has a long history of a conservative debt policy. However‚ in 1998 they reinstituted their share buyback program. This means that they intended to issue up to $1 billion in debt in order to repurchase equity. Their intentions in repurchasing equity are to maximize
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MEMORANDUM TO: UST Inc. Investors CC: FROM: DATE: SUBJECT: Debt Policy at UST Inc. ADD INTRO PARAGRAPH From the viewpoint of the bondholder‚ UST Inc. has various attributes that make the company a safe‚ yet sometimes risky investment. Qualities that make UST Inc. a superior investment include their excellent A-1 credit rating and their strong brand name and market position‚ which has made UST Inc. one of the most profitable companies in corporate America. While their asset tangibility
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Problem 12- 6 Statement of — Direct Method The income statement for Astro Inc. for 2010 is as follows: For the Year Ended December 31‚ 2010 Sales revenue $ 500‚000 Cost of goods sold 400‚000 Gross profit $ 100‚000 Operating expenses 180‚000 Loss before interest and taxes $ ( 80‚000) Interest expense 20‚000 Net loss $( 100‚000) Presented here are comparative balance sheets: December 31 2010 2009 Cash $ 95‚000 $ 80
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Sep) UST Inc. is considering a debt-for-equity recapitalization. In the deal‚ UST will issue $1 billion debt to buy back stocks. In class we argue that an important determinant of a firm’s debt policy is the tradeoff between the tax benefits of debt and the costs of financial distress and bankruptcy. Mature firms generating positive and stable operating income are more likely to take advantage of the debt tax shields and less likely to verge on bankruptcy‚ and thus may consider using more debt in
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Income statement The income statement or the profit and loss account as it is also called measures reports how much profit (wealth) has the business generated over a period of time. To measure profit the total generated revenue over a period must be identified. Revenue is a measure of inflow of economic benefits arising from the operations of the business. These benefits will either result in an increase of assets such as cash or amounts owed to the business by the customers or a decrease
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Summary UST Inc. has historically been one of the most profitable companies. Profitability stems from its commanding market share‚ strong name brand recognition‚ historical pricing flexibility‚ and growing smokeless tobacco demand. However‚ UST faces business risks including eroding market share‚ tobacco lawsuits‚ and reduction in innovation. UST Inc. is considering a leveraged recapitalization to help in shielding the tax‚ increasing the share price and eliminating idle cash and debt
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4-1 4 Income Statement Usefulness Predicting future performance. 4-2 Evaluate past performance. Help assess the risk or uncertainty of achieving future cash flows. Income Statement Limitations Companies omit items that cannot be measured reliably. 4-3 Income is affected by the accounting methods employed. Income measurement involves judgment. Income Statement Quality of Earnings Companies have incentives to manage income to meet or
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TRUE-FALSE STATEMENTS 8. Closing entries are not needed if the business plans to continue operating in the future and issue financial statements each year. 9. The dividends account is closed to the Income Summary account in order to properly determine net income (or loss) for the period. 10. After closing entries have been journalized and posted‚ all temporary accounts in the ledger should have zero balances. 11. Closing revenue and expense accounts to the
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The Income Statement This indicates financial performance over a period of time. It is usually done at the end of a financial year (30th June)‚ but an income statement can be made up at other times‚ e.g.‚ if a business wishes to apply for a loan‚ the bank may ask for a more recent income statement. The other names for this kind of statement are Revenue Statement and Profit and Loss Statement. Income Statement for Ima Mess‚ year ended 30.6.12 |
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