Solvency‚ Profitability‚ and Efficiency are the basic types of financial ratios. The liquidity ratio is the ratio of current assets to current liabilities. Profitability ratios indicate management’s ability to convert sales dollars into profits and cash flow. Solvency ratios indicate financial stability because they measure a company’s debt relative to its assets and equity. Two common efficiency ratios are inventory turnover and receivables turnover. Business manager needs to determine what the financial
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believe‚ but cannot guarantee‚ are correct. 1. Under certain conditions‚ a particular project may have more than one IRR. One condition under which this situation can occur is if‚ in addition to the initial investment at time = 0‚ a negative cash flow occurs at the end of the project’s life. a. True b. False 2. The modified IRR (MIRR) method has wide appeal to professors‚ but most business executives prefer the NPV method to either the regular or modified IRR. a. True b. False 3
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Decision Trees for Decision Making The management of a company that I shall call Stygian Chemical Industries‚ Ltd.‚ must decide whether to build a small plant or a large one to manufacture a new product with an expected market life of ten years. The decision hinges on what size the market for the product will be. Possibly demand will be high during the initial two years but‚ if many initial users find the product unsatisfactory‚ will fall to a low level thereafter. Or high initial demand might
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March 25‚ 2013 Daneene Barton Caledonia Products is determining a new business proposal. The organization is planning a free cash flow investment and evaluating a project to determine the net present value of the business proposal. In the project financial analyst from Caledonia Products will consider the net value versus the internal rate of return. The research will determine
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HMTC’s main problem is shortage of cash. Interpretation of Company’s Exhibits Cash flow statement of the company for 9 month period is provided as an attachment. It shows that only 27% of cash is coming from operations. The company’s net operating cash flow is 1.2 million while its current liabilities amount to 4.5 million. This signals a need for the company to raise money to meet its liabilities. Cash outflows of the company reveals that nearly half of the cash (49%) goes to inventory and 45%
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statements. A) True B) False 7) A company that produces drugs is preparing a balance sheet. Which of the following would be most likely to be considered a long-term asset on this balance sheet? A) a patent for a drug held by the company B) the cash reserves of the company C) commercial paper held by the company D) the inventory of
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shows how to use revenue and expenses. It is also used to look back at previous time periods and to look forward at future time periods. Overall‚ budget defines precise targets for a given time period concerning following financial activities: * Cash receipts and payments * Sales volumes and revenues‚ broken down into amounts and prices for each of the products or services provided by the business * Detailed inventories requirements * Detailed labor requirements * Specific production
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2 FINAL PROJECT To: Mr. V. Morrison‚CEO‚Caledonia Products From: The Assistant Financial Analyst Re: Cash Flow Analysis and Capital Rationing Considering the introduction of a new product‚ you are currently in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital. This project is expected to last 5
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potential returns. According to the risk-return tradeoff‚ invested money can render higher profits only if it is subject to the possibility of being lost. 3. Why are we interested in cash flows rather than accounting profits in determining the value of an asset? We are more interested in cash flows
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Harnischfeger 1. Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements. In the 1984 the corporation computed depreciation expense on plants‚ machinery and equipment by using the straight-line method for financial reporting purposes. These changes were made to provide a more equitable allocation of the cost of the plants. 2. What is the effect of the depreciation accounting method change on the reported income in 1984? How will
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