Financial Structure of Financial Environment
Financial structure is the mixture of financial instruments, financial markets and other financial institutions operating within the economy. ( Fase & Abma, 2003). Financial structure consists of a company's assets, capital and liabilities. Financial structure is also specific equity and long-term debts that firms employ to finance its business operations. Typically, financial structure of a company generally affects the business operations and value of a business. On the other hand, financial structure could also be described as the amount of organization's cash flow that goes to shareholders and creditor. Organizations use their financial structure to finance their short-term and long-term obligations and financial structure is different from capital structure since capital structure only focuses on the long-term source of funds, which include long-term debt, debentures, and equity capital shares.
On the other hand, financial environment constitutes the financial market that includes foreign exchange market, bond…… [Read More]
While all of this is well and good, the reality is that most businesses are not founded by accountants and most find a financial system that is beneficial for them. For instance, it may have been acceptable in school to take large risks on certain costs; however, if a business is struggling and incoming capital is lower, then no risks may be considered acceptable.
The final financial factor that businesses use on a regular basis is leveraging. When a company wants to grow and expand in exceedingly large ways, it does so by weighing the current assets and determining the amount the company as a whole is willing to borrow. The key where financial impacts come into play is the question of how much and for how long to borrow (Ghosh 1993). The primary technique used for this is known as forecasting. A financial analyst will take the companies past…… [Read More]
The overall financial structure of JP Kenny Limited can be analyzed from the viewpoint of time duration, which includes short-term and long-term funds.
Debt- Equity Ratio
This ratio analyses relationship between borrowed funds and JP Kenny's capital. It is indicative of reflective claims of the creditors and the shareholders against JP Kenny's assets. Here analysis of the long-term Equity ratio and total equity ratio will be made.
Long-Term Debt -- Equity Ratio
This ratio establishes the relationship between long-term outside liabilities and JP Kenny's funds. It shows the proportion of the External and Internal Equities. The long-term debt for 2010 was 1, 138,000 pounds and the equity shareholder was 8, 885,000 pounds giving a 8:1 long-term debt equity ratio. This shows that creditors of JP Kenny have a larger claim than the shareholders, therefore it can be construed that JP Kenny will deal with stringent conditions from lenders,…… [Read More]
Financial Structure Information System
The delivery of care across all levels of healthcare delivery system is largely influenced by information and information exchange. The information exchange takes place between the various stakeholders in the health care delivery process i.e. The health care facility, the patient, the caregiving team, and political-economic environment. The significance of information in health care delivery process and system has contributed to the development of health care information systems. Health care information systems can be described as systems that captures, manages, stores, and conveys information that is related to people's health and activities of a health care organization of facility. These systems play a crucial role in the management of information exchange towards decision-making on health care activities and processes. Health care information systems have different structures including financial structure, which has positive and negative impacts and is applicable to different work areas in the health sector.…… [Read More]
5 times the actual value of equity.
The return on investment is calculated by dividing the total net profits by the total assets value and shows the "overall effectiveness to generate profits from total investment in assets." At the Colorado Group, the return on investment amounted to 20.4% in 2006 and 21.5% in 2005. The small decrease from 2005 to 2006 can be explained by the fact that that the net profits decreased significantly during this period of time and that the decrease of the total assets value was by no means similar in value.
The gross profit margin is calculated by dividing the net sales minus the cost of goods sold by the net sales value and shows the "profitability of a company's sales after the cost of sales has been deducted." In this case, in 2006 this ratio was equal to 54.4%, as compared to 55.9% in 2005.…… [Read More]
Understanding how a company operates within any industry is dependent upon comprehension of many financial properties. Assessing the financial stability of a company is essential in determining the company's strengths and weaknesses as well as ultimately assessing its profitability. Financial ratios should be considered a useful tool when examining the profitability and efficiency of any company. Some companies are certainly more successful and profitable than others, and pharmaceutical companies in particular seem to have a distinct advantage when measuring financial ratios.
When assessing any organization, for terms of this paper are as follows: Johnson & Johnson, Pfizer and Merck it is important to consider the profitability and efficiency of the company. This is among the first information investors will explore before "investing" in a company. atio analysis is a critical analysis of the financial structure of an organization. There are four categories of ratios that need to be…… [Read More]
A non-for-profit entity has a financial structure based on assets and liabilities solely. Such an entity does not have equity. The main source of financing for a non-profit entity is donations. A non-profit entity is, other than a few fixed assets, a flow-through entity. This means that donations come into the organization, and are then rendered out in the form of services. There is a high emphasis on expenses. Most charities will have some current assets, but usually these are things likely to be converted to cash. Otherwise, the assets tend to be equipment or buildings, likely depreciable. The balance sheet is known as the statement of financial position, outlining the assets and liabilities. These are not necessarily balanced, which is why the term balance sheet is not used (Foley, 2015). Spending in a non-profit is almost entirely discretionary in nature, technically, though there may be ongoing programs.…… [Read More]
" Bhattacharya (1988). It is used to calculate the value of a company based on its total cash flow. (oss, 1988).
Bhattacharya (1998) states that this theory assumed that lower dividends will lead to reduced levels of new equity and this will bring about a balance between the debt and equity of a company. This is not ture for utilities companies and other monopolistic firms where new equities are rare.
For the "Current Examples" in our table, do we need to find specific company examples that exist today or have happened in the last 2-3 years? Or will it suffice to give a theoretical example of a measurement in a firm that fits the model.
For example, would this be OK.
Efficiency Theory Example
- Production returns based on shared, variable, and per unit costs divided by the total output of a factory in a given period of time.
Instructor…… [Read More]
stock market and the Banks promote economic growth and it provides a critique of their functions in transitional economies. Every country depends on its economy for its growth. For a country to be stable it has to be stable in terms of its economy. Bank and stock market contribute to a great extent to the economy growth of every country where it provides firms with opportunity to get funds thus encouraging more investment from the firms. At the same time they give information on the ways resources should be allocated. The development of a financially sound, market-oriented banking system is always considered to be fundamental to a flourishing transition. Arguably, it is important to macroeconomic stability and to positive long-term growth prospects. As documented, bank intermediation in transition economies continues to be stunted after a decade or addition of reform, mainly where advancement in banking reforms is inadequate. The banking…… [Read More]
Financial esource Management
eaching a financial decision regarding heath care services
All forms of industries deemed financial management as expressive in origin till the 1960's. Its basic and sole role was to ensure financing for completing the business's operatives and functions. The department for business planning or marketing would project a net total for meeting the services and meeting daily demands; managers would calculate the assets required to complete a given project needed, equipment's, supplies and building. Financial management is a field which focuses on business securities as well as the markets in which they are in key demand. Also, more emphasis is made on how businesses can tap new markets and unlock their hidden potential. As a result, financial management books were pretty explanatory and predictable in origin during those times. (Sandrick, 2008).
These days, financial management plays a pivotal role in day-to-day operations of a business. The responsibility…… [Read More]
This study emphasized the importance roles of financial derivatives, which has been known for the last decade and its effects on the Global financial crisis. It further analyzes the impact of financial derivatives and how it can be controlled to prevent corporations from incurring a lot of risks. It also explains the existence of financial derivatives since 1970, to the recent Global Financial Crisis which occurred in the 2006.
Risk is a feature associated with all productivity. As a result, financial markets adjust themselves to the fluctuation of exchange and interest rates. Hedging risk, these corporations highlight the importance of risk management tools known as Derivatives. Derivatives are defined as financial tools providing investors with effective solutions when avoiding risk caused from market volatility (Dodd, 2006). Financial derivatives are considered to be an effective risk management tool associated with Financial Engineering creating solutions to financial problems (Marks, 2010).…… [Read More]
Financial analysis is a tool that allows third parties to analyze corporate financial statements. One of the main reasons that the Securities and Exchange Commission requires that statements are compiled and presented in a consistent manner is to ensure that third parties will be able to use the statements to compare different companies. These comparisons can, among other things, help with investment decisions. This paper will compare PepsiCo and Coca-Cola Company, the two leading soft drink marketers in the world. PepsiCo is actually the larger of the two companies, because it is more diversified, with its snack food properties. These properties also alter the company's finances, creating certain points of difference between the two companies. This report will cover a number of different forms of financial analysis, arriving at a conclusion about which company has the stronger financial position.
The first set of ratios to be studied…… [Read More]
Financial Contracting for New Venture:
Investments in a new venture usually involve financial contracts between the entrepreneur and external investors. These external investors include venture capitalists, angel financiers, banks, private financing companies, and credits unions among others. Notably, financial contracts can have positive and negative effects on the new venture. For instance, an angel financier can add a clause on the financial contract that will not permit the entrepreneur to borrow more funds without permission from the lender. While this is likely to occur when the lending institution has a mortgage or lean on the venture's property, the clause is usually added to lessen foreclosure risk. As an individual seeking to venture in a clothing business for the Mixed Martial Arts customers to provide shirts, hoodies/fleeces, and hats, it is important to choose the most appropriate type of financial contracting with the external investor. This process of selecting the most…… [Read More]
Assumption Use in the Financial Plan
Additional Assumption in Sensitivity Analysis
FIRST TWELVE MONTH CASHFLOW RESULT
HOW MUCH SHOULD NORMAN PAY FOR THE EXCLUSIVE RIGHT?
FORECASTED CASHFLOW FOR THE NEXT FIVE-Year
CASH FLOW WITH A LOAN AT 8% PER ANNUM
THE SALES PRICE AND kg SALES GRADUALLY INCREASE AT 5%
THE SALES PRICE PER kg INCREASE AT 10% UT THE UNIT SALES REMAIN AT 5%.
Investment Value Using At Discounted Rate 5%
est Financial Plan and Option
Assumption Use In The Financial Plan
Additional Assumption in Sensitivity Analysis
It is further assumed that price will increase gradually at the rate of 8% per annum and sales will increase at 7% per annum.
For the purpose of analysis, both the sales price and Kg sales will gradually increase at 5%.
Another scenario will be that the sales price per Kg increase at 10% but the unit sales…… [Read More]
he only observation that could be made here is that one would expect a larger proportion of the total expenses to be allocated to research and development, given the fact that this is such an important part of Microsoft's activity and essential in order to obtain a competitive advantage on the market.
Asset and Capital Structure
Cash and cash equivalents
otal fixed assets
he asset structure at Microsoft reflects some of the particularities in the industry, notably the fact that the inventory levels tend to be quite low, as compared to the other assets. his means that the I industry is not one supporting production on stock. At the same time, the value of the total fixed assets is significantly high, which can be partly explained by the size of the company and the investments in land, buildings and equipment.
Part III…… [Read More]
Financial analysts play a number of roles within an organization. They made assessments of the value of investments the firm has or may have in the future. They can specialize in determining the value of projects. In addition, financial analysts are engaged in risk assessment, and take steps to determining the best ways for the firm to mitigate the risks that have been identified. Overall, financial analysts use a multitude of different knowledge sets including taxes, finance, economics and risk management to assist the company in making the best financial decisions for the firm (BLS, 2010).
a )The net profit would be the gross profit less operating expenses, interest expenses and tax expenses. Thus, the net profit is: $1,000,000 - $345,000 - $125,000 = $530,000. From this the taxes are removed: $530,000 * (1-.3) = $371,000. The preferred stock dividends of $57,000 must then be removed in order to determine…… [Read More]
As noted, the leverage is deliberate, and probably is designed to deliver these ROEs to shareholders.
H&M pays out a large portion of its profits as dividends. Nordstrom's dividend is healthy for an American company, but far less than that of H&M. Nordstrom shareholders must rely on capital gains to a greater extent. Given that both companies are growing, H&M's ability to deliver both growth and dividends is superior for shareholders. These superior outcomes are, not surprisingly, reflected in the share prices of the two firms, with H&M having the better P/E ratio (22.2 versus 15.4).
In addition to the financials, it is important to consider what recent news might affect the viability of working in these firms in the future. There are no major news stories for either company. Essentially, both are still growing firms, with a moderate growth pace. Nordstrom is still focused on the North American market,…… [Read More]
Bull Run, Virginia
Pleasant Valley Estates is envisioned as an upwardly mobile community - located in Bull Run, Virginia - and targeted toward the young, single professional and young families.
Cash Flow Statement Overview
The cash flow statement constitutes a financial document, which details the exchange of cash between a business and the outside world while strategically demonstrating the in and outbound logistics. Flow is traditionally categorized as:
flow "in" from Operations - the cash the entity or company makes by selling goods and services, flow "in" from Financing - the cash the entity or company raises by selling stocks and bonds, and flow "out" to Investing - the cash the company spends toward investing in future growth
Each of these flows can move bi-directionally. Investors generally like to see that the company covers its spending with cash from operations rather than resort to financing. The cash flow…… [Read More]
Indeed, risk-seeking is pervasive in the financial industry, as competition compels banks to seek higher returns. Regulation such as capital requirements can help to reduce risk-seeking behavior, although the negative affect such regulations have on value can ultimately encourage at least some degree of risk-seeking. Despite this unintended potential consequence, regulation serves to neuter overly aggressive bankers and reduces risk in the banking system. Reducing the risk in the banking system is congruent with the government's objective of making effective use of taxpayer money.
A fourth consideration is that consumers demand regulation. hile this does not constitute an economic case for regulation, it must be understood that governments are not motivated by purely economic considerations. Consumers want to know that their deposits are safe and that they can access money when needed for homes, vehicles and small businesses. Consumer demand, while irrational, is a key driver in the level of…… [Read More]
The horizontal analysis showed that FedEx's profits in 2009 were just 5% of their profits in 2007. Given that EBIT contributes to the T3 component of the Z-score, which is the most significant component by weighting, this would explain why the Z-score dropped so much. The other major contributor to the Z-score is the drop in the company's market cap. The market cap is deemed important in part because the market's view of company reflects the most known information at the time. The market has a strong ability to predict financial distress. A depressed stock price indicates that investors need a greater percentage return on the expected future cash flows from the company in order to invest -- an indicator that the market believes the firm's risk level has increased. The market cap contributes to the T4 component, which is the smallest component of the Z-score. However, the decline in…… [Read More]
Overall, at&T is the more profitable of the two companies. That Verizon has the stronger gross margins and at&T the stronger net margins indicates that at&T does a better job of controlling its cost structure than does Verizon.
The telecommunications industry is highly competitive in both the landline and wireless segments. By 2006, wireless spending had match wireline spending. hile this presents significant opportunities for telecommunications, much of that spending comes in the form of cannibalizing, as wireline revenues have been decreasing steady over the past decade, matching the steady increases in wireless spending.
There are four major wireless operators in the U.S. And over 170 regional players (Megna, 2009). Competition is based on coverage area (capital investment), price and customer service. Both firms can be considered industry leaders. As of 2007, at&T had a subscriber base of 65.7 million and wireless revenues of $10.9 billion. Verizon had…… [Read More]
If this investment was financed entirely with debt, the new capital structure would be 67.2% debt and 32.8% equity. If this investment was financed entirely with equity, the new capital structure would be 30.5% debt and 69.5% equity.
One rule of thumb for making such a decision is to match the asset type with the financing. Therefore, an asset that is expected to have a service life of five years would be financed with a five-year bond issue, so that the cash flows from the asset can be used to cover the costs of financing. In this case, the asset life is not known, so any financing type can be used.
Internal cash is not possible because the firm likely does not have $10 million in cash if it only has $17.2 million in assets and $17.5 million in annual revenues. A debt issue will leave the firm with a…… [Read More]
92%. This compares to the 0.36% for its peers last year and 17.42% over five years for the sector. UHS has a net profit margin of 3.86% and a five-year average net profit margin of 4.49%. The sector averaged a net profit margin of -0.38% last year, but has a five-year average of 12.27%. hat this indicates is that historically UHS has lagged its peers in terms of bottom line margins. They have, however, been able to sustain those margins during a downturn in the business cycle whereas their competitors have struggled. This stability is a sign of financial strength. It may also contribute to their willingness to be more highly levered than most of their competitors in order to drive growth.
Revenue growth last year was 13.36%. This compares with 6.5% the previous year and 8.19% the previous year. The five-year average growth rate is 8.01%. Revenues grew faster…… [Read More]
3.2: Data Used: The data used in this study effot includes pimay and seconday data. Along with infomation etieved fom the liteatue eview, this eseache also pesonally compiled fom... (Consideations fo this section: What spatial and tempoal chaacteistics do data include? Do any known o anticipated souces of eo exist in the data?
3.2.1: Spatial and tempoal chaacteistics: Specific data chaacteistics within a sub-section
3.3: Methods and techniques: Two specific types of methods and techniques ae elated in this section
3.3.1: Method fo Specific Field wok: Subsections discuss specific technique.
CHAPTER IV: ANALYSIS
4.1: Intoduction: Hee, this eseache discusses the contents of the sections included/following in this chapte. A numbe of coss-efeences fom the methods chapte ae also included. This analysis chapte does not sum up the findings etieved fom the liteatue eview and this eseache's study "in one wod," albeit, it does pesent a synopsis of elevant findings etieved…… [Read More]
Despite having an exceptional pace of growth throughout the early years of their existence, Saatchi & Saatchi is facing client attrition and declining revenues. What had happened through their continual restructurings was the corporation lost track of their core vision, mission and values. The distance between these three core attributes of their business and financial performance had drifted apart so far that financial results were showing the increasingly disjointed nature of their corporate culture (Greenhalgh, 2004). The reliance on a balanced scorecard to unify their core vision, mission and values back to financial performance was needed (Niven).
As a result of the continued deterioration of financial and customer performance, management at Saatchi & Saatchi put into place financial and customer-driven goals for the company. The financial objectives included the foundation of their company's resurgence and comeback, including growing the revenue base faster than market rates, converting…… [Read More]
The reasons companies create and maintain accounting systems
Accounting is the language of business. The ability to record transactions is critical for companies in regards to keeping track of critical performance metrics. The subsequent management of revenues and expenses is critical for the sustainability of the business. Accounting systems, therefore, are needed for accurate assessment of business progress. Businesses create these systems to help facilitate their overall strategic objectives. For instances, if accounts receivables are high, management may be inclined to increase credit terms to discourage customers from borrowing. A natural reaction from this strategic move could possibly be an increase in customers paying in cash. Through tightening credit, management was able to avoid potential delinquencies while increase the cash on hand. These decisions can be made through accurate and timely accounting systems.
In addition, accounting systems can help businesses determine methods by which to improve operations. Aspects…… [Read More]
There are many ways that one can finance a project. Either a company can use its investors own funds, that is equity, or borrowed money, meaning debt can be used. Generally, the two are used in a combination depending on the risk preference of the investor. Financial leverage is financial leverage "The degree to which an investor or business is utilizing borrowed money" (InvestorWords.com). There are many views on using debt to finance a company. Some would say that it is a bad thing, and that it feeds on itself, but then again, it could be used to boost up return on equity very easily. This is because it can be used to increase the asset base of the company, and hence increasing the earning power of the company, without actually increasing the amount of equity. The reason is that an equity investor is entitled to a share…… [Read More]
Financial Accounting Case Study
Despite its large size and established market position, General Mills, like any other company, has to grapple with those factors that, if not properly addressed, could have a negative effect on performance. Market demand is one of those factors. In order to effectively address the issue of demand, the company has to determine and respond to two major demand-related issues. First, there is need to understand the factors influencing demand. These include the prices of products, the availability and prices of substitutes produced by competitors, and government regulation - especially with regard to the promotion of healthy foods. Secondly, there is need to analyze the outlook of this demand in the near future. General Mills offers for sale a wide range of food items such as snacks. The demand of these could fall significantly in future, mainly due to the government's effort to ensure…… [Read More]
She is well-connected within the community and is confident that her business would be profitable within a year or two. She has a strong, charismatic personality and is also connected to Milwaukee's artistic community through her husband's architectural work restoring some of the city's beautiful historic buildings. She has a considerable portfolio, and occasionally sold stock photos or worked as a wedding photographer when she was in law school.
Laura realizes that in the current market, individuals and companies may be cutting back on "luxuries" like professional family and staff pictures. However, she has a range of expertise in architectural and interior photography as well as portrait and event photography. She is willing to diversify her skill set and pursue further education if necessary, although in her field an additional artistic degree would only be desirable for teaching or competing for gallery showings at a national level.
According to her…… [Read More]
Thus, the Board ultimately had little control over this particular cost, which is how it is found itself in a difficult financial position this year. The general lack of control over the budget is a definite weakness for the Bridgeport Board of Education.
In lieu of financial statements, there were two main resources available to help assess this organization's health. Its budget book was the primary source, as it detailed the Board's financial situation with respect to its inflows and outflows. News items are also helpful. Since the Board is not a public company, it is not required to disclose items of financial significance, but such items may come to light through the local news media.
The organization's approach to creating shareholder value is to spend its money on the programs that deliver on its strategic objectives. These include graduating students at a college-ready level, reducing the dropout rate to…… [Read More]
Once the written request is received, we will pay within 30 days (PCC.com, no date). If you paid by credit card, we will issue the refund to your card directly. If you paid cash, we will issue you a check.
This policy is ideal for a small generalist office.
The policy should outline the Medical Associates position clearly, so that the patient has an understanding of how billing and collections work from our end. This is important because of medical offices are somewhat unique in this regard compared to other businesses. The multiple means of payment, often for a single bill, necessitate this written explanation for the patient.
The main objective of the financial policy is to effectively communicate the means and methods of payment to the patients. Not only should it clarify the role of the office, but it should also clarify for the patient their role…… [Read More]
The applicability of Activity-Based Costing for decision making is directly linked to the influences that ABC has over process control. In this order of ideas, by better identifying the incurred costs or the overhead, managers can better monitor and control the evolution of products, prices, costs and consequently, profits. ABC identifies the costs incurred by each item in terms of resources consumed. Therefore, with the aid of ABC, organizational managements have the ability to control resource allocation.
Activity-Based Costing reveals yet another significant feature: it has the ability to evaluate the costs of not producing an item. This basically means that with the aid of the ABC, managers are able to know how much they have lost due to machine malfunctioning, product damaging, increased inventory costs or time spent waiting for a machine component to be replaced. "Activity-Based Costing therefore gives not only much better cost control, but increasingly, it…… [Read More]
Another point of difficulty is that different firms may use different calendars when reporting. For example, the fiscal year at FedEx ends at the end of May, while at UPS the fiscal years ends at the end of December. This makes for a difficult comparison. For example, fuel prices escalated rapidly in early 2008. Comparing a FedEx FY09 and UPS FY08 would be very difficult, given that one of those statements would reflect the fuel price increase and the other would not.
There are also limitations to accounting analysis as a whole. At best, these forms of analysis are only as good as the financial statements from which they are produced. A large number of variables contribute to those statements, including accounting policy, accounting accuracy (or lack thereof), outdated information and changes in the accounting standards (NetTom, n.d.)
Changes in accounting policy or accounting standards can distort data year-over-year, which…… [Read More]
This seems to have been in response to the perception of an upcoming slowdown and indicates that the firm is both cognoscent of its liquidity position and is taking steps to ensure the robustness of that liquidity position.
Moreover, in terms of cash flow coverage, State Street is in a solid position. Cash flow coverage measure the ability of the firm to pay its interest expense. In each of the past three years, State Street has generated more interest revenue than they have incurred interest expense.
Because it is difficult to separate operations and investments in a financial services firm, such as State Street, measuring the firm's operating efficiency is valuable. State Street's asset turnover is 6.7%. The gross margin was 15.1% in the past year, slightly down from the previous year. Overall, the gross margin has been steady and healthy over the past few years. If one were to…… [Read More]
Financial Proposal: Dorchester, Ltd.
As discussed in earlier papers, for Dorchester, the final decision as to which particular nation to invest in is dependent on a range of distinct scenarios; these factors naturally impact the selected acquisition target. Before the acquisition target is selected, the nation which houses the potential acquisition target needs to be scrutinized closely. For instance, the trade environment of the nation where the prospective acquisition is located needs to be assessed, since this factor will impact the cost and ability to engage in trade. The political environment of the nation where the prospective target resides is also a crucial factor that needs to be examined closely. No potential targets exist in peaceful vacuums; rather all the prospective nations looked at during this course have some element of political risk attached to them. Furthermore, as discussed during earlier assignments, it's been found that political stability of a…… [Read More]
Financial Fraud Fannie Mae
eview of Fraud Schemes within Fannie Mae 1998-2004
The agency found the fraud understatements of earnings and illegal gratuities that led to accounting violations and inability to meet Wall Street goals.
The investigation of Lee Frakas, executive of a major mortgage company which had dealings with Fannie Mae with hundreds of fake mortgages. The Securities Exchange Commission cited that Fannie Mae had to repay earnings and correct their books for the period 2001 through 2004. This major undertaking will cost the company over $11 billion by SEC estimates. In addition the Department of Justice has conducted a criminal investigation on the board members.
The top executive managing Fannie Mae were found guilty of illegally reporting accounting information that led to their receiving million dollar payments. Under Fraudulent Financial Statement Schemes this case is one of corruption and financial fraud. The specific areas include Illegal…… [Read More]
The reclassification of this expense from an aggregated category to a specific one, Fuel and oil expense, reflects a shift in how hedging will be done in the future within Southwest. Hedging was treated as a pre-emptive financial strategy within the air carrier, often managed completely off the Income Statement and included in accrued or long-term liabilities (Carter, ogers, Simkins, 54). Given the market-to-market impact of fuel contracts being negative ($73M in 2009 per the annual report) and the ineffectiveness of fuel hedges settling in future periods of -$97M the net effect on the company's profitability will be a -$54M reduction in asset valuation. This is compared to a $92M valuation in 2008. This significant shift in the valuation of hedging contracts led to the redefinition of the expense category as well.
Despite the losses incurred by Southwest with their hedging strategies in 2009, the results…… [Read More]
Conduct a benchmarking analysis
As explained by Prasnikar, Debeljak and Ahcan (2005) benchmarking depends on comparing between two activities of an organization and another. In our case, we shall compare McDonald's activities and those of its competitors, Burger King and Wendy's.
• Best practices
McDonald's as a main player in the fast food industry is concerned with best practices with the industry. To this end, the corporation has adopted some best practices that include sustainability, nutrition and well-being, employee experience ad environmental responsibility. Accordingly, McDonald's protects the environment by going green and using methods that protect and conserve the environment. McDonald's also encourages its suppliers to uphold effective environmental. The company treats it employees well and offers them good working conditions as a way retaining them. Employees are offered training and promoted accordingly. McDonald's also adheres to ethical conduct its operations and food items are produced ethical. Similarly, the company…… [Read More]
The overall examination of financial documents is integral to the proper functioning of government entities. For one, examinations help to prevent budgetary shortfalls that may jeopardize the economic viability of governments. Stress tests, are particular useful as they provide outlooks contingent of varying macroeconomic situations. These stress test and examinations, when done correctly, allow stakeholders to make proper assessments as to the financial stability of their government. Without these assessments, unexpected events may cause policy changes that harm society overall. Aspects such as the budget cuts currently underway in many of the nation's largest states are a direct result of lackluster financial examinations. Consequently, the individuals will have to sacrifice in the form of higher taxes and lower benefits (McKenna, 2006).
When evaluating Swobodaville's financial condition based on the partial list of factors given, a number of elements cause concern. First, the low income, sales tax exempt households,…… [Read More]
Even if the prices of consumer staples such as gas continue to escalate in America and in Europe, this is less likely to deter European consumers, given that such cost-of-living budgetary issues such high fuel costs have long become acceptable to European consumers, and because public transportation is better funded within the EU. The fears of competitors regarding European investment may actually be a potential boon, given that they will temporarily lessen the threat of competition in the present environment, and the fact that European spending seems to be continuing, unabated -- hence the fears of inflation.
In contrast, the average American's spending on consumer goods may flag, given likely increases in the interest rates by the Fed. This is especially true for mid-market products like Levi jeans. Consumers who are lower middle-class are likely to cut back on their clothing budgets, or buy from discount retail stores. Upper…… [Read More]
Secondly, performance-related pay increases prevents inflationary tendencies since such increases are the outcomes of increased productivity. Managers and employees are benefited by performance-related pay increases in the following way: when profit or performance goes up higher earnings go to the employees. However, when the profits come down, the lowering of performance-related pay can protect employees from job losses. Moreover, there is enhanced motivation as employee can identify with the success of the business. Depending on the information-sharing habits of the management, pay variations may result in employees knowing more about fortunes and misfortunes that a business goes through. (de Silva, 1998)
Other advantages of performance-related pay include the following: it is an effective method of coping with poor performance; introducing such a reward system can help to develop a performance culture within the company; it can work as a direct incentive for employees to help reach defined job targets; an…… [Read More]
3.2.3 Portfolio Diversification of Investment in Global Property Markets
ecause the global property markets are affected by globalization and specific country / regional factors, means that the overall amounts of risks will vary, the most notable include: transparency and efficiency. Where, each country / region has different on laws and regulations pertaining to the real estate markets. This means that the risks in a number of different markets will depend upon specific market conditions themselves, reflecting these two factors. To protect themselves against these kinds of risks, many investors will often seek to diversify their portfolio. Diversification is: when you are investing a number of different asset classes in real estate, across a variety of countries / regions. The idea is that if a risk occurs in a specific country or region, the other areas that you are diversified in will protect you against the severity of the declines. For…… [Read More]
The ratios that derive from the financial accounting statements are used frequently in finance to determine the health of a company (Russo, n.d). hen a lender wants to know what interest rate to charge a borrower, it looks at the liquidity and solvency ratios of the company to determine the likelihood of default, and assigns the interest rate based on that analysis. This is just another example of how the information that accountants compile and audit is used in financial management.
The same can be said for the investments side of finance. For example, when one wants to invest in a company, or in derivatives relating to that company, accounting information is critical. Usually this is financial accounting information, but if managerial accounting data can be found then that is also sometimes used. Formulas such as Black-Scholes are used to value derivate holdings of companies for the production of financial…… [Read More]
Suppose you are comparing two firms within an industry. One is large and the other is small. Will relative or absolute numbers be of more value in each case? What kinds of statistics can help evaluate relative size?
Gibson, Charles H. (2012-05-10). Financial Reporting and Analysis (Page 217). Cengage Textbook. Kindle Edition.
When comparing two firms that are unequal in size, the relative financial ratios are more appropriate for any type of comparison. The advantage of using ratios is that they represent a metric that can be easily compared with industry standards or other specific companies of different sizes. The financial statement represents a snap shot of a company's performance over a given time period and the financial information that these reports provide can allow the analysis of a wide range of different ratios. These ratios can provide insights to factors such as the company's ability to repay…… [Read More]
Every country has a different level of financial development. The World Bank uses four measures of banking development: depth, access, efficiency and stability. An international banking conglomerate considering expansion will want to understand a country's local banking conditions in order to have the most informed view, to help with making the expansion decision. In this scenario, the countries being evaluated are the United States, Saudi Arabia, Brazil, India, South Africa, Iran, China and Turkey. This report will analyze the banking systems of each of these countries against the World Bank criteria.
Basic Economic Conditions
Before investigating the banking systems in each country, a brief overview will be provided of the prevailing economic conditions in each nation. The size of the economy, measured by GDP and by GDP per capita, is related to the market potential for a bank to enter the country. The more money there is a…… [Read More]
The industry average current ratio is 2.5 (MSN Moneycentral, 2009), so the Gap has less capacity to meet its current obligations than many of its peers. However, in the retail industry most firms have a large portion of their current assets tied up in inventory, which distorts the current ratio figures higher. The Gap's figure of 1.855 is strong and indicates that the company will have little difficulty in meeting its upcoming obligations.
Overall, the liquidity measures provide an indication of the company's short-term health. Low amounts of working capital or a poor current ratio can indicate that the firm is in short-term distress. The figures for the Gap in 2008 do not indicate a firm in financial distress. Rather, they indicate that the company will have little difficulty in meeting its upcoming financial obligations. The company has strong working capital figure and a high current ratio. The latter is…… [Read More]
For a corporation, this increased their bottom line results and the total amounts of income they are generating. When this happens, investors are pleased with the direction of the firm and will reward the managers with lucrative pay packages and other benefits. ("omney Forgoes Full Charity," 2012)
The reason why this is important is because corporations' can avoid having to pay the same taxes twice under the progressive system. The way that this occurs is the company can take a write off for operations they have overseas. This is because they can argue that the income was not generated within the United States. When this happens, they will be taxed at a lower rate for any kind of profits from these locations. ("omney Forgoes Full Charity," 2012)
If a firm is generating a certain percentage of their earnings using this strategy, they can reduce their tax liabilities dramatically. This is…… [Read More]
Coefficients reflect to a rate of change in the dependant variable which leads to one point change in dependant variable. For example, coefficient of -0,05 infers small negative influence of this explanatory variable on the dependant variable, while coefficient of 1.5 implies that 1.5 rate growth of this variable will lead to positive growth by one point of the explanatory variable.
The results of the regression model are as follows:
GDP ($, billions)= 568.04 + 16.07*Interest_ate + 1.19*Disposable_Personal_Income -64.75*Personal_Savings_ate + 0.5*Personal_Expenditure_On_Nondurables - 0.26*Personal_Expenditure_On_Durables.
Disposable Personal Income
Personal Savings ate
Personal Expenditure Nondurables
Personal Exp Durables
The result suggest, that autonomous value of the GDP is rather high, or that explanatory variable that has big negative affect on GDP was not included in the model. Interest rate has the biggest positive affect on the GDP, while simple calculation…… [Read More]
Financial Management - Personal Investment Decision for a Public Company
ationale for Toyota
Stock price analysis
Toyota Motor Corporation, which is recognized as is one of the most exhilarating productions in the automobile business these days. The company is one of the most economical corporations all over the world and has appreciated a record setting achievement for a very long time. In the previous years, the worldwide automobile industry has been overwhelmed by soaring gas prices, and hard-hitting environmental protection laws. With that even being said, it has not been a walk in the park for Toyota, but to no gain the company has been one of the most effective establishments so far. Toyota Motor Corporation has also been one of the manufacturing leaders in creating new and innovative technologies that take advantage of the productions existing barriers. There are a lot of things…… [Read More]
For both debt ratios, the lower their values are the more conservative the company is, choosing to finance its operations/investments from internal sources. However, such a company may miss out on growth and investment opportunities.
It is recommended for companies not to finance more than 50% of their capital via external debt. The debt-to-equity is superior to the recommended values, indication a much higher proportion of equity financing via external debt. The debt-to-asset is also higher to the recommended values, but much closer indicating that the assets are around 80%financed by external debt.
The two indicators suggest that the group is heavily financing its capital/assets from external debt, which is explained by the group's expansion strategy. However, FFS's values are not as justified because the company didn't expand as fast as the group, yet the debts were proportional to those of the group. At both levels, group and company, the…… [Read More]
This aspect of the study were inclusive of works of "economic historians on the development of financial systems" most particularly the "banking systems" worldwide and exactly what the resulting impact will be. (Rousseau & Sylla, 2001) hile the two identified "strands of literature" one dealing with domestic and the other international developments, are no always related to one another" but are however, both elements of the story called financial globalization." Definition of a "Good Financial System" states that there are five key components which are: (1) Sound public finances and public debt management; (2) Stable monetary arrangements; (3) a variety of banks, some with domestic and others with international orientations, and perhaps some with both orientations; (4) a central bank to stabilize domestic finances and manage international financial relations; and: (5) ell-forming security markets."
Impacts of Globalization on National Economies
Impacts on the economies of the world have been stated…… [Read More]
Because the home country is not required to reimburse foreign depositors for losses, there is no corresponding financial penalty for lax supervision; there is, though, a benefit to the country with lenient regulatory policies because of increased revenues generated and the employment opportunities these services provide (Edwards 1999). Furthermore, banks seeking to conduct multinational business are attracted to countries where incorporation laws and the regulatory framework offer less regulatory oversight (Edwards 1999). The quid pro quo nature of offshore financial services is clearly indicated by Edwards's observation that, "Multinational banks provide the offshore financial centre with increased tax revenue and employment for its citizens. Because the benefits outweigh the costs, offshore financial centres have a powerful incentive to maintain lenient regulatory policies. As a result, multinational banks incorporated in an offshore financial center successfully avoid supervision by an effective home country regulator" (1999, p. 1267). Given the scope of the…… [Read More]
Nevertheless, more crucial remained the truth that the dollar itself oscillated severely as against the yen that is another vital currency for carrying out business for the affected nations. The fading of the dollar within the decadal period from 1985 to 1995 made a huge boon in the trade surplus for the affected nations. Thereafter, the acute turnaround began in 1995 wiped their enormous edge in price and damaged their current account situation, which in its effect spoiled the trust in the market created an appropriate climate for the crisis. To put it differently, it was not the system of linking the dollar in its own which is responsible. The cause was the non-observance of the basic instability in the economies of the nations and the uncontrolled oscillation of the exchange rate of dollar-yen. The dilemma was the outcome of the huge quantity of unstable capital and the blind follower…… [Read More]
The use of FID in this industry also has been more tactical and focused on the scanning and inventory management systems as opposed to automating an entire supply chain and creating auditabiluity and therefore increasing performance of the entire chain. This is one of the shortcomings of how the industry is shortchanging itself in terms of technology adoption. In addition, the majority of spending in this industry is going to most likely be centered on marketing (Bourdeau, 26) in addition to merger and acquisition activity. The dual strategy of driving for greater differentiation but also acting as the consolidator are the most likely strategies of market leaders in this industry looking for growth strategies going forward. As a result of all of these factors, Foot Locker faces a very challenging future.
Tables 5 and 6 provide analysis of the footwear industry by comparing Foot Locker's performance relative to their top…… [Read More]
Similarly, an offshore might set up a wholly owned subsidiary in an OFC to extend offshore fund administration facilities or other facilities. (the future for offshore financial centers (OFCs)) multinational corporation establishes an offshore bank to deal with its foreign exchange operations or to ease out financing of a joint venture spanning on a global basis. An onshore bank sets up a wholly owned subsidiary in an OFC to extend offshore fund administration services. The proprietor of an onshore bank coming under legal regulation sets up a branch "satellite" bank in an OFC. The appeal of an OFC might comprise no capital tax, no restraining tax on dividends or interest, nil taxation on transfers, nil corporation taxes, no capital gains tax, no exchange controls, lenient legal rules and management, less strict reporting necessities, and trading limitations. Offshore corporations or international business corporations -IBCs are means having restricted liability recorded in…… [Read More]
budget components (Policy Document, Financial Plan, Operating Plan, Communications Device), rank them in order of importance in your opinion and justify your rank order.
ank 1: Policy Document: The Policy Document is synonymous with a Budget Document. The budget document can be a line item detailed listing of every expenditure for every department within the government operation. The document conveys the policies and procedures of the administration and outlines its funding.
The expenditure amount is a further clarification of the entity's commitment to their underlying cultural and operating practices which complement their specific organizational goals and organizational strategies. Organizational strategies in accordance to the Policy Document include the Strategic Planning Document which details how the organization will propel itself into the coming years as a strategic city seeking to attract the best and the brightest to start businesses and to be residents. As the underlying specific goals to the macro…… [Read More]
financial analysis of Chevron from the perspective of a potential creditor. The issue surrounds primarily the creditworthiness of Chevron rather than the type of credit that would be issued. Specifically, the issue is whether "we" would lend Chevron 10% of its net assets. The net assets for Chevron are $209.474 billion, so the amount in question is $20.9 billion in new debt. The report will first analyze the financial statements of Chevron in general terms, focusing on trends and ratios, and drawing conclusions about the overall financial health of the company based on that analysis. The second part of the paper will outline some of the criteria that a lending institution would have for lending to a company, and then that criteria will be applied to Chevron specifically.
Chevron operates in the hydrocarbon industry, where it is one of the world's largest companies with sales of $241.9 billion and net…… [Read More]
financial crisis a "crisis of capitalism?
Compare and contrast the theories of Susan Strange, Karl Polanyi and Giovanni Arrighi. Explain how three of them accessed issues of Financial crisis and its relationship with capitalism
Starting from 2008 onwards, we are currently experiencing an unremitting state of economic recession. Each of the three theorists stated in this essay have different perspectives of whether or not the recession indicates crises of capitalism. Whilst Susan Strange and Karl Polanyi have a more optimist perspective on the subject and indicate that rather than crisis, the recession may, in effect, be, in the first case, a misplaced paradigm (or different, tortured perspective) and in the second case, only a slight wrench that necessitates government intervention for amending a temporary situation, Arrighiri sees the situation as indeed manifesting something that is intrinsically, irremediably, and inherently wrong in the structure of capitalism itself. Each of these views…… [Read More]
financial comparison of Pepsi and Coke. The comparison of the two companies is facilitated by the use of GAAP, which means that the financial statements of the two companies are constructed, broadly, according to consistent methodologies and criteria. As a result, there should be direct comparability between the statements of these two companies.
Two main techniques will be used for this comparison. The first is horizontal analysis, where the results of the company are compared against past results from the same company. The second is vertical analysis, where the results of each company are compared on a year-over-year basis according to how the different line items are weighted. The two companies can also be compared on this basis. Horizontal analysis allows the two companies to be compared on the basis of which company is growing faster or controlling costs better. The vertical analysis allows the two companies to be compared…… [Read More]
S. firms. he ambiguity can therefore not be ignored.
he work of Gomez-Gonzalez et al. (2012) investigated whether the use of foreign currency derivatives have any effect on the market value of firms using evidence gathered from Colombia. heir results indicated that an increase in the level of hedging ultimately leads to a higher growth in the value of a firm. he use of financial derivates (hedging) is therefore indicated to have a positive impact on a firms' value.
he work of Clark and Mefteh (2010) investigated the relationship between foreign currency derivative usage and firm value using evidence gathered in France and found that the value effect of the financial derivative usage is about 1.5 times higher and was much significant with relatively larger exposure to depreciation while remaining insignificant for firms with lower levels of exposure. his implies that the effects of the hedging instruments depends on the…… [Read More]