aiming at 16% after tax return and tax rate of 38%. Identification of Issues and related alternatives: • Debt to Equity Ratio of 1.23 more than 1 reveals that more than half of assets are financed by debt. • $3.6 million required for repairs of hull before 2013. • Gross profit of 60% has not increased much over past three years it will affect operating income if there is a decline in sales. • Operating profit of .23% in 2012 seems to decline from 2011 of .26% implies company earns less per dollar
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the impact be on the firm’s shareholders? The impact on shareholders can be analyzed by calculating the EPS and ROE of the firm under the alternative scenarios as follows: All Debt With $5‚000‚000 Expansion Current Growth in Revenues Revenues EBIT Interest EBT EBT*(1-T) # of shares EPS Debt Equity Debt/Equity Ratio Return on Equity 15‚000‚000 2‚250‚000 0 2‚250‚000 1‚350‚000 1‚000‚000 1.35 0 15‚000‚000 0.00% 9.00% Worst Case 10% 16‚500‚000 2‚475‚000 500‚000 1‚975‚000 1‚185‚000 1‚000‚000 1.185 5‚000
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Corporation -Earnings Before Interest & Tax - EBIT An indicator of a company ’s profitability‚ calculated as revenue minus expenses‚ excluding tax and interest. EBIT is also referred to as "operating earnings"‚ "operating profit" and "operating income"‚ as you can re-arrange the formula to be calculated as follows: |EBIT = |Revenue - Operating Expenses | Also known as Profit Before Interest & Taxes (PBIT)‚ and equals Net Income with interest and taxes added back
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[FINANCIAL PERFOMANCE OF ] NCC Bank Ltd. 1.0: INTRODUCTION 1.1: Origin of the report For this requirement of “Management of Financial Institution” we have prepare this report. We are also interested to know actual financial performance of NCC Bank Bangladesh Ltd. 1.2: Purpose The purpose of preparing this report is to focus on the financial performance of NCC Bank Bangladesh Ltd. Specifically; we have prepared this report to know About NCC Bank Bangladesh Ltd. Industry Analysis and SOWT Analysis
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through its cost of capital and can affect the share of the earnings that pertain to the equity shareholders. Introduction to Capital Structure Theories There are 4 basic Capital Structure theories. They are: 1. Net Income Approach 2. Net Operating Income Approach 3. Modigliani-Miller (MM) Approach and 4. Traditional Approach Generally‚ the capital structure theories have the following assumptions: 1. There are no corporate taxes (this assumption has been removed later). 2. The firms
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percent rate of interest) and $5‚000 in equity. Both firms sell 10‚000 units of output at $2.50 per unit. The variable costs of production are $1‚ and fixed production costs are $12‚000. (To ease the calculation‚ assume no income tax.) a) What is the operating income (EBIT) for both firms? Company A Company B Sales 25‚000.00 25‚000.00 Variable Expenses 10‚000.00 10‚000.00 Fixed Costs 12‚000.00 12‚000.00 EBIT 3‚000.00 3‚000.00 b) What are the earnings after interest? Company A
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Question 1 Examine BA’s Strategic decisions over the past 5 years and state what you consider to be the most crucial for the next 5 years. Give your reasons. The strategic decisions that they have taken for the last past 5 years can be given as follows. • A strong marketing campaign focusing on customer care. • Expanding their destinations & global connections. • Differentiated service levels that are offered to the customers. • Requirements & preferences for
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rate of interest) and $5‚000 in equity. Both firms sell 10‚000 units of output at $2.50 per unit. The variable costs of production are $1‚ and fixed production costs are $12‚000. (To ease the calculation‚ assume no income tax.) 1. What is the operating income (EBIT) for both firms? The operating income or “earnings before interest and taxes (EBIT) for both firms are: EBIT – 10‚000 * 2.5 – 10‚000 * 1 – 12‚000 = $3‚000 2. What are the earnings after interest? Firm A’s Earning s after
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Importance of the theories and implications on corporate financial decisions in Malaysia As business grows wider and complex across the border‚ there is a demand for better valuation tool to evaluate the performance of the business. It is important to adopt more innovative performance metrics so that the company’s management behaviors can be closely monitored to achieve the goal of maximizing the shareholders’ benefits. It is also important to access a firm’s value for any decision making regarding
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increasing as well as the net profit margin. Total Leverage: Unfavorable. The trend is positive because total leverage has increased most years. The higher number‚ the more debt a company has which means that the company has to pay a higher interest expense. Therefore‚ the net income will be lower which will in turn lower the net profit margin‚ affecting the ROA. Stockholders want ROE to increase‚ but not strictly due to the leverage increase. From 2008 to 2009 the total leverage of Netflix
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Background Coca-Cola Coca-Cola was founded in 1886 by John Pemberton who was a civil war veteran and Atlanta pharmacist. Today‚ Coca-Cola company is the world’s leading manufacturer‚ marketer‚ and distributor of nonalcoholic beverage concentrates and syrups‚ over 10 billion gallons‚ used to produce nearly 400 beverage brands. Also‚ Coca-Cola has been ranked the best value of brand name on the world for more than 10 years. Pepsi Pepsi-Cola was created in the late 1890s by Caleb Bradham‚ a New
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280‚000 Cost of Pairs Sold 150‚000 Warehouse Expenses 15‚000 Marketing Expenses 35‚000 Administrative Expenses 8‚000 Operating Profit (Loss) 72‚000 Interest Income (expenses) (10‚000) Pre-tax Profit (Loss) 62‚000 Income Taxes 18‚600 Net Profit (Loss) $ 43‚400 Based on the above income statement data (assume interest income is zero)‚ the company’s interest coverage ratio is 28.0. 280.0. 4.34. 7.20. 6.20 2. Which of the following statements about striving to reduce labor costs per
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Step 2: $416‚684/ 365 = 1142 $379183/365 = 1039 Step 3: Step 3: 59‚787/1142 = 52.35 days 37‚666/1039= 36.25 days 5. Solvency Ratio: Debt Service Coverage Ratio (DSCR) Change in Unrestricted Net Assets (net income) + Interest‚ Depreciation‚ Amortization/ Maximum Annual Debt Service 2009: 2008: $168‚611/$14‚609=11.54 158‚578/$4‚195=37.80 6. Liabilities to Fund Balance: Total Liabilities / Unrestricted Fund Balances 2009: 2008: $462‚153/126‚564
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can be made into earnings before taxes (EBT) by multiplying the three-step equation by 1 minus the company’s tax rate: ROE = (earnings before tax / sales) * (sales / assets) * (assets / equity) * (1 – tax rate) We can break this down one more time‚ since earnings before taxes is simply earnings before interest and taxes (EBIT) minus the company’s interest expense. So‚ if a substitution is made for the interest expense‚ we get: ROE = [(EBIT / sales) * (sales / assets) – (interest expense / assets)]
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9) Industrial goods manufacturer Carterpilla Company earned $10‚501‚000 in net income. It paid out a cash dividend of $2‚100‚000 only to its preferred stockholders. If the firm has 750‚000 shares of common stock outstanding‚ what is the firm’s earnings per share on the common stock? a. $14.00/share b. $16.80/share c. $11.20/share d. $2.80/share e. None of the above (Use the following
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BUSI 3013 ACCOUNTING CONCEPTS FOR FINANCIAL DECISIONS Mid-term Exam 1 - Chapters 1 8 PRACTICE March 5‚ 2013 Name: ___________________________________ 1. Carter Corporation has some money to invest‚ and its treasurer is choosing between City of Chicago municipal bonds and U.S. Treasury bonds. Both have the same maturity‚ and they are equally risky and liquid. If Treasury bonds yield 6 percent‚ and Carter’s marginal income tax rate is 40 percent‚ what yield on the Chicago municipal
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The Coca-Cola Company and Subsidiaries Financial Review Incorporating Management’s Discussion and Analysis We exist for one reason: to maximize share-owner value over time. To accomplish this mission‚ The Coca-Cola Company and its subsidiaries (our Company) have developed a comprehensive business strategy focused on four key objectives: (1) increasing volume‚ (2) expanding share of worldwide beverage sales‚ (3) maximizing long-term cash flows‚ and (4) improving economic profit and creating economic
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financials to their benefit‚ they would naturally prepare a yearly budget and most likely a five-year budget with expected sales and costs‚ as well as the direction of the company and a growth plan. Custom Snowboards should clean up their financials before pursuing an expansion. A clean-up should begin well in advance to requesting funding for growth or expansion. One way to make the financials look better might be to care less inventory on-hand by using Just-It-Time (JIT) models. Custom Snowboards
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investing in product innovation and marketing its core brands.It has also recently expanded its product set to include lower-priced products (which are subject to a lower tax rate) thereby earning solid sales growth and further operating margin expansion in its cigarette business‚ despite rising cigarette taxes. Analysis Y/e 31 Mar (Rs m) | FY12 | FY13 | FY14E | | Revenues | 2‚47‚984 | 2‚96‚056 | 3‚48‚005 | | yoy growth (%) | 17.2 | 19.4 | 17.5 | | Operating profit | 84‚996 | 1‚03‚318
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000 | | $ 120‚000 | | $ 2‚520‚000 | | Administrative | $ 1‚800‚000 | | $ 1‚800‚000 | | $ 1‚725‚000 | | Interest | $ 540‚000 | | $ 540‚000 | | $ 540‚000 | | Total Fixed Expenses | $ 4‚800‚000 | | $ 4‚800‚000 | | $ 7‚125‚000 | | Income before Income Taxes | $ 1‚600‚000 | | $ 800‚000 | | $ 475‚000 | | Income Tax (30%) | $ 480‚000 | | $ 240‚000 | | $
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