RATIO ANALYSIS
Review the financial information pertaining to Salco Inc. in Study Problem 4-10 on pages 113 and 114 of you text. Answer the following questions in an Excel document. Solve using Excel formulas (preferred) or clearly write out the steps you took to calculate your answers. Round any dollar amounts to the nearest dollar ($1,500,074) and any percentages to two decimals (9.56%).
QUESTION 1
Calculate Salco’s total asset turnover, operating profit margin, and operating return on assets.

ANSWER 1
Total Asset TurnoverOperating Profit MarginOperating Return on Assets

Formula: Total Asset Turnover = Sales/ Total AssetsFormula: Operating Profit Margins= Operating Profits/ SalesFormula: Operating Return on Assets= Operating Profit Margin x Total Asset Turnover 4500000/ 2000000500,000 / 4,500,000 =.1111x2.25

2.2511%25%

Note: I added net fixed assets and current assets for total assets.Note: Operating profits= EBITDA

QUESTION 2
Salco plans to renovate one of its plants, which will require an added investment in plant and equipment of $1 million. The firm will maintain its present debt ratio of .5 when financing the new investment and expects sales to remain constant. The operating profit margin will rise to 13 percent. What will be the new operating return on assets for Salco after the plant’s renovation?

ANSWER 2
Operating Return on Assets

Formula: Operating Return on Assets= Operating Profit Margin x Total Asset Turnover Operating Return on Assets = .13 x X
Operating Return on Assets =.13 x 1.5
19.50%

Note: Total Asset Turnover
Formula: Total Asset Turnover = Sales/ Total Assets
4,500,000/ 2,000,000 + 1,000,000=1.5

QUESTION 3
Given that the plant renovation in part b occurs and Salco’s interest expense rises by $50,000 per year, what will be the return earned on the common stockholders’ investment? Compare this rate of return with that earned...

...
Question 1
(5 points) $100 today is worth the SAME as $100 tomorrow.
True
False
Question 2
(5 points) $100 invested for 10 years at 12% interest is worth more in FV terms than $200 invested for 10 years at 4% interest.
True
False
Question 3
(5 points) Shawn wants to buy a new telescope. He estimates that it will take him one year to save the money and that the telescope will cost $200. At an interest rate of 6%, how much does Shawn need to set aside today to purchase the telescope in one year? (Enter just the number without the $ sign or a comma)
Answer for Question 3
Question 4
(10 points) Johnny and Darren both earn $100 working on their respective neighbors' big farms. Johnny puts his $100 in the piggy bank that his parents gave him to encourage him to save. Darren puts his money in a savings account his parents set up for him. The savings account pays 3% interest. They both take their money out after 5 years. How much more money does Darren have than Johnny?
3
16
10
19
Question 5
(10 points) Your dad invested $25 for you in 1942 in a fund and you have not withdrawn any money since.If the fund has averaged a return of 8 percent over the last 70 years, what is the current value of that investment? (Round to the nearest whole dollar; enter just the number without the $ sign or a comma)
Answer for Question 5
Question 6
(10 points) Bridgette’s grandparents opened a savings account for her and placed $500 in the account. The account pays...

...FIN 612 Managerial FinanceWeek One Assignment
Your assignment for this week is to complete the following questions and problems from Chapter 1. Please submit your complete assignment in the course room by the due date.
Chapter 1 Questions
(1-1) Define each of the following terms:
a. Limited partnership-a partnership in which limited partners’ liabilities, investment returns, and control are limited; general partners have unlimited liability.
Limited liability partnership- (LLP) combines the limited liability advantage of a coporation with the tax advantages of a partnership.
b. Stockholder wealth maximization- The decision making process of ensuring that the company is profitable and is making healthy long term decision that will increase and protect the wealth of its stockholders.
c. Money market (financial market for securities that will mature within a year or less); capital market (financial market for securities that have a long term maturity, this also includes corporate stocks); primary market (market in which securities are sold for the first time ie:IPO’s); secondary market (the market in which securities are resold or traded between the public after and IPO)
e. Private markets (market in which transactions occur directly between two parties, such as a band and a borrower); public markets (Market in which transactions occur on the large...

...(NOWC) = Current Assets - (Current Liabilities - Notes Payable) Equity Multiplier = Assets / Equity
Free Cash Flow (FCF) = EBIT (1 -T) + Dep. - (Capex + ∆NOWC) Total Asset Turnover (TATO) = Sales / Total Assets
Market Value of Equity = Stock Price x Number of Shares - Total Book Value of Equity Total Amount of Debt = Target Debt to Asset Ratio % x Assets
*Manipulate this formula (MVE) to solve for the various parts Times Interest Earned (TIE) = EBIT / Interest
Return on Total Assets (ROA) = Net Income / Assets
Market Value Added (MVA) = Market Value of Equity - Book Value of Equity Basic Earning Power (BEP) = EBIT / Assets
Dividends (If not given) = Net Income - Change Return on Equity (ROE) = Net Income / Equity
Net Income (if not given) = The change in retained earnings + dividends paid *To determine NI via ROE: NI = Target ROE x Equity
Economic Value Added (EVA) = EBIT (1 -T) - (WACC x Total Investor Supplied Capital)
After Tax Dividend Yield = Preferred dividend rate x [1 - (1 - Div Exclusion %) (T)] Market / Book Ratio (M/B): Stock Price / Book Value Per Share (BVPS)
*If a divident exclusion % is not given to you, assume 70% *Book Value per Share (BVPS) = Total Book Equity / Number of Shares
∆ Net Income = ∆ in Dep x (1 - T) DuPont Equation: ROE = Profit Margin x...

...Question 1 | | 1 / 1 point |
To save for her newborn son's college education, Lea Wilson will invest $1,000 at the beginning of each year for the next 18 years. The interest rate is 12 percent. What is the future value?
Question options:
| 1) | $7,690 |
| 2) | $34,931 |
| 3) | $63,440 |
| 4) | $55,750 |
Question 2 | | 1 / 1 point |
Sharon Smith will receive $1 million in 50 years. The discount rate is 14%. As an alternative, she can receive $2,000 today. Which should she choose?
Question options:
| 1) | the $1 million dollars in 50 years. |
| 2) | $2,000 today |
| 3) | she should be indifferent |
| 4) | need more information |
Question 3 | | 1 / 1 point |
Mike Carlson will receive $10,000 a year from the end of the third year to the end of the 12th year (10 payments). The discount rate is 10%. The present value today of this deferred annuity is:
Question options:
| 1) | $61, 450 |
| 2) | $42,185 |
| 3) | $46,149 |
| 4) | $50,757 |
Question 4 | | 1 / 1 point |
If expected dividends grow at 8% and the appropriate discount rate is 12%, what is the value of a stock with an expected dividend of $2.33?
Question options:
| 1) | $62.88 |
| 2) | $19.41 |
| 3) | $29.12 |
| 4) | $58.25 |...

...Industry 2005
1.Current Ratio
1.6
1.7
1.67
1.6
2.Quick Ratio
0.9
1.0
0.96
0.9
3.Inventory Turnover
8.1
9.3
7
8.4
4.Average Collection Period
33 days
37 days
41.57/42days
39 days
5.Total Asset Turnover
2.3
2.2
2.08
2.2
6.Debt Ratio
60%
56%
53.3%
58%
7.Times Interest Earned Ratio
2.5
3.5
4.68
2.3
8.Gross Profit Margin
21%
19.7%
18.26%
20.4%
9.Operating Profit Margin
4.7
4.8%
5.1%
4.7%
10.Net Profit Margin
1.8
1.6%
2.5%
1.4%
11.Return on Total Assets
4.1
3.5%
5.20%
3.08%
12.Return on Equity
0.3%
7.9%
11.14%
7.3%
LIQUIDITY:
1. current ratio is liquidity ratio is balance-sheet financial performance measure of company liquidity. The higher the ratio, the more liquid the company is. Commonly acceptable current ratio is 2; it's a comfortable financial position for most enterprises. Acceptable current ratios vary from industry to industry. For most industrial companies, 1.5 may be an acceptable current ratio. In 2005 it is 1.67 less than 2 but more than 1.5 so it is acceptable current ration. The industry 2005 is 1.6 it is higher than industry average and more liquid the company is
2. In finance, the quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values....

...Week1 Assignment
Armando Samia
migosamia@yahoo.com
949 600 3240
Entrepreneurial Finance
January 13, 2013
1.[Financing Concepts] The following ventures are at different stages in their life cycles. Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.
A. Phil Young, founder of Pedal Pushers, has an idea for a pedal replacement for children’s bicycles. The Pedal Pusher will replace existing bicycle pedals with an easy-release stirrup to help smaller children hold their feet on the pedals. The Pedal Pusher will also glow in the dark and will provide a musical sound as the bicycle is pedaled. Phil is seeking some financial help in developing working prototypes.
Pedal Pushers is in the Start Up Stage. The business is still just a thought or an idea. It will have to overcome the challenge of market acceptance. At this stage of the business, Phil Young has to focus on matching the business opportunity with his idea.
Start Up stage companies have no proven market. The business has to rely on cash from owners, friends and family. Other potential sources include suppliers, customers, government grants and banks.
B. Petal Providers is a firm that is trying to model the U.S. floral industry after its European counterparts. European flower markets tend...

...
Calculating OCF. Hammett, Inc., has sales of $34,630, costs of $10,340, depreciation expense of $2,520, and interest expense of $1,750. If the tax rate is 35 percent, what is the operating cash flow, or OCF?
Operating cash flow $ 17283
Calculations:
Sales - Cost - Depreciation = EBIT(Earnings Before Interest Taxes –Depreciation Amortization)
34630 - 10340 - 2520 = 21770
EBIT - Interest = Taxable Income
21770 - 1750 = 20020
Taxes (35%) = 20020 x .35 = 7007
Net income: 20020 - 7007 = 13013
EBIT + depreciation - less taxes = OCF
21770 + 2520 - 7007 = 17283
Calculating Cash Flows. Weiland Co. shows the following information on its 2014 income statement: sales = $167,000; costs = $88,600; other expenses = $4,900; depreciation expense = $11,600; interest expense = $8,700; taxes = $18,620; dividends = $9,700. In addition, you’re told that the firm issued $2,900 in new equity during 2014, and redeemed $4,000 in outstanding long-term debt. a. Calculating Cash Flows. What is the 2014 operating cash flow? b. What is the 2014 cash flow to creditors? c. What is the 2014 cash flow to stockholders? d. If net fixed assets increased by $23,140 during the year, what was the addition to NWC?
Sales: $167,000
Costs: $88,600
Other Expenses: $ 4,900
Depreciation: $1,600
EBIT: $71,900
Interest expense: $8,700
Taxable Income: $63,200
Taxes: $18,620
Dividends: $9,700
a) What is the 2014 operating cash flow?
Operating cash flow = EBIT + Depreciation - taxes
$59,000 +...

...INSTRUCTIONS: |
1. Answer all questions.
2. Answer in ENGLISH.
3. Arithmetic calculators are allowed. (Cellular phones may not be used as calculators).
4. Only answers written in the answer booklet will be marked.
5. Dictionaries are not permitted.
Question 1
Listed below are multiple choice questions. Read the statements and select the most appropriate
Answer. Write the numbers 1.1 to 1.10 and then only the alphabet of your choice. Eg 1.11 C
1.1. _________ analysis involves the comparison of different firms’ financial ratios at the same point in time.
(a) Timeseries
(b) Crosssectional
(c) Marginal
(d) Quantitative
1.2. _________ analysis involves comparison of current to past performance and the evaluation of developing trends.
(a) Timeseries
(b) Crosssectional
(c) Marginal
(d) Quantitative
1.3. Present and prospective shareholders are mainly concerned with a firm’s
(a) risk and return.
(b) profitability.
(c) leverage.
(d) liquidity.
1.4. The _________ is useful in evaluating credit and collection policies.
(a) average payment period
(b) current ratio
(c) average collection period
(d) current asset turnover
1.5. ABC Corp. extends credit terms of 45 days to its customers. Its credit collection would be considered poor if its average collection period was
(a) 30 days.
(b) 36 days.
(c) 47 days.
(d) 57 days.
1.6. The statement of cash flows includes all of the following categories...