-------------------------------------7 Measures of Management Performance---------------------------------------------------------------------------------------------9 ROI------------------------------------------------------------------------------------------------------------------------------------------9 ROE------------------------------------------------------------------------------------------------------------------------------------------9 ROA----------------------------
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Chapter 16- Old 10th Edition Capital Structure Decisions: The Basics MINI-CASE ASSUME YOU HAVE JUST BEEN HIRED AS BUSINESS MANAGER OF PIZZAPALACE‚ A PIZZA RESTAURANT LOCATED ADJACENT TO CAMPUS. THE COMPANY’S EBIT WAS $500‚000 LAST YEAR‚ AND SINCE THE UNIVERSITY’S ENROLLMENT IS CAPPED‚ EBIT IS EXPECTED TO REMAIN CONSTANT (IN REAL TERMS) OVER TIME. SINCE NO EXPANSION CAPITAL WILL BE REQUIRED‚ PIZZAPALACE PLANS TO PAY OUT ALL EARNINGS AS DIVIDENDS. THE MANAGEMENT GROUP OWNS ABOUT 50 PERCENT OF
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Profit Margin 6 Liquidity Measures 7 Current Ratio/Acid Test (Quick) Ratios 7 Financial Leverage Measures 8 Leverage ratio/ debt ratio/ debt to equity ratio 9 Investment Returns Measures 9 Return on Investment (ROI) 10 Return on Equity (ROE) 10 Management Efficiency Measures 10 Asset Turnover 10 Inventory Turnover 11 Conclusion 13 References 14 Executive Summary As one of the most recognizable brands worldwide‚ Starbucks is considered a monumental success
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11 D. Cash Flow Statement 12 E. Payback Period of money (PP)‚ Net Present Value (NPV)‚ Accounting Rate on Return (ARR)‚ Return on Investment (ROI) and Return on Equity (ROE) E.1. PP (Payback Period of money) 13 E.2. NPV ( Net Present Value) 14 E.3. ARR (Accounting Rate on Return) 14 E.4. ROI (Return on Investment) 15 E.5. ROE ( Return on Equity) 15 I – SWOT ANALYSIS D.SWOT matrix SWOT O T S S/O
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WHY IS FINANCIAL LEVERAGE A DOUBLE-EDGED SWORD Financial leverage means acquiring assets using funds provided by creditors and preferred stockholders to improve Return on Equity (ROE) of a company rather than utilizing owners’ equity. If a company can borrow money at a rate lower than the return on assets or ROI then the owners’ equity position will be improved. This occurs because less of the equity is required to purchase the assets. It is a double-edged sword and may be positive or negative.
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The Role of Financial Ratios Table of content Introduction 3 Chapter 1. Notion and types of ratios. 4 1.1 Liquidity ratios. 5 1.2 Financial leverage ratios 7 1.3 Funds management ratios 9 1.4 Profitability ratios 12 Chapter 2. Use of financial ratios. 15 2.1Use and Limitations of Financial Ratios 15 2.2 Used financial data 15 2.3 Financial ratios calculated for The Apple Company 16 2.4 The Dupont Model 18 Appendix 1 21 Conclusion 23 Bibliography 24 Introduction I have chosen
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Home Work 1. In 2005 IBM had a return on equity of 26.7 percent‚ whereas Hewlett-Packard’s return was only 6.4 percent. Use the decomposed ROI framework to provide possible reasons for this difference based on the data below: IBM HP NOPAT/Sales 9.0% 2.7% Sales/Net Assets 2.16 2.73 Effective After-Tax Interest Rate 2.4% 1.1% Net Financial Leverage 0.42 -0.16 Answer: IBM Analysis Return on Operation Asset = NOPAT/sales * Sales/net assets = 9
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European Master in System Dynamics Financial Analysis: tools for business profitability & solvency analysis Enzo Bivona Assistant Professor in Business Management University of Palermo - Faculty of Political Sciences PhD in Business Management - University of Catania (Italy) Master Phil in System Dynamics - University of Bergen (Norway) enzo.bivona@unipa.it Financial Analysis • LEARNING OBJECTIVES – How to review the performance of a business – Indentify the limitation of the performance review
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growth. This performance is evident throughout their SEC Filings. First we will look at SWA’s ROI and ROE compared to the rest of the industry. Two thousand and one and 2002 were difficult years for the airline industry. Most airlines showed negative ROIs and ROEs‚ however SWA posted an average ROI of 16.76% for the three years ending in 2002. Likewise‚ they also showed a substantial 12.87% growth in ROE‚ during the same period. The good news did not stop there. If we look at P/E Ratios‚ Southwest
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CASE CONTEXT: Enager Industries‚ Inc. was a relatively young company‚ which had grown rapidly to its 1993 sales level of over $222 million. (See Exhibits 1 and 2 for financial data for 1992 & 1993). The company has three divisions which were treated as independent companies because of their differing nature of activities. The corporate office of Enager consists only of few managers and staff. The function of the corporate unit is to coordinate the activities of the three divisions. One aspect
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