ACCO 400 Lecture Notes - Lecture 5: Contingent Liability, Net., Information Asymmetry

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greenraccoon535

31 Oct 2016

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Graph, time vs. price at time o of a gn earnings which is better than expected. All the market experts have an estimate of what they think it will be and relative to what the earnings news come it it will gn or bn. 2 ways to look at these : 1. Look at stock price near the time the gn earnings came out. Is it our news that drove the stock price response. (-/+1, We look at the other days because people may respond differently and to ensure no leakage of info. (short window) does market react to our income: 2. Analyze charts and assume they are efficient and thus the information will be picked up. The goal is to see if the value relevant information is in the stock prices. We are assuming all the information is valuable to investors. (long window) Association of income and stock price to show if all value relevant information is in income.

Related Questions

Read the attached article, âHow the cost of shirt adds upâ andanswer the following question. For amounts, if there is a rangegiven, use the high value. Each question is worth 2 points.

1. What are the direct material costs of the making the shirt?List each item and the cost. Then total up the direct materialcosts. Item Cost Total Direct materials:

2. How much is the direct labor cost of producing the shirt?

3. The total cost of producing the shirt is $30.00. Using youranswers to #1 and #2, how much manufacturing overhead cost must beassigned to each shirt? Show your computation here:

4. Katherine & Jared MacLane sell the shirts to awholesaler/retailer. Compute the profit per shirt that they make.Show your computation here:

5. The shirt is then sold by the wholesaler/retailer. Computethe profit per shirt that retailer makes. Show your computationhere:

A KP MacLane polo shirt.

CBS News

(CBS News) Ever wonder who figures out how much a shirt willcost? Erin Moriarty of "48 Hours" has been ADDING IT UP:

Designers Katherine and Jared MacLane so believe in the poloshirt they brought to market this past November that they arewilling to share the nuts and bolts of their business - and theydon't shy away from a tough question, such as pricing:

"Most of the polo shirts I can buy at retail are $90," saidMoriarty. "And you're asking $155. How do you convince somebody tospend that kind of money on a polo shirt?"

"We just say, 'Just try it on!'" she laughed. "I think thatpeople will see the difference.

"We almost took a backwards approach to manufacturing. A lot ofpeople look at, 'Oh, how are we going to keep our costs low so wecan make a higher profit?' And what we looked at is, 'What can wedo to make this the best shirt possible?' And then we'll price itfrom there."

Katherine and Jared met while working at the Hermes boutique inBeverly Hills - which may help explain why they looked to Francefor the fabric for their shirts.

"A woman's shirt can take anywhere from a yard to a little lessthan a yard of fabric, per shirt," said Jared. "And that runs about$6.10 or $6.50 depending on what time of the year we buy."

True mother of pearl buttons were too expensive - a dollar each.They found similar but sturdier versions in Hong Kong.

"Our buttons are about three cents apiece," said Jared. Thereare three - plus an extra one "in case, you know, you need it downthe road."

And instead of a box, the shirts are placed insidehand-embroidered linen bags from Vietnam.

"We didn't want to give the customer something that could beeasily, you know, thrown away," Jared said. "We wanted it to bereused, wanted to be special. And we wanted to be of the samequality that the shirt is made.

The linen bags: $2.90 apiece.

But what adds most to the cost of the shirts? The MacLanesactually produce them here in the United States.

Jared said manufacturing the shirts domestically costs 75percent more than making them outside the U.S. - a little over $11per shirt.

And for how little could they be made in, say, China? One or twodollars.

There is also the cost of thread, the labels, cloth tape for theshirt vents, tissue paper, and shipping from the New York factoryto the MacLanes' home in Atlanta.

All told, one KP MacLane polo shirt costs about $30 to make.Using the standard mark-up, the wholesale cost is $65.

As for the retail price? You may be surprised that clothing isusually marked up MORE than 100%. That's how the MacLanes arrivedat $155.

"It sounds like, in order to make this company successful andhave people buy your shirts, they really do have to kind of knowthe story behind each shirt," said Moriarty.

"Yeah, and we're happy to tell it," said Jared. "A lot of timeswe go shopping and you don't always consider what goes into agarment."

"If they know the kind of thought that we're putting behind ourproduct, and they know the kind of quality that we're putting outthere, I think if you build that loyalty and build trust, I thinkthat that will keep you around a lot longer than somebody who'sjust craving a brand - as opposed to a brand and a qualityproduct," said Katherine.

plumhedgehog664

Question 1

Based on the article below, suggest the possible implicationsof Hua Yang Bhdâs gearing situation on the companyâs:

1.Current borrowings

2. additional borrowings in the near future

HUA YANG ACQUIRES FOUR PARCELS OF LAND IN KAJANG FOR RM70MILLION

Hua Yang Bhd (Dec 28, 60.5 sen)

Upgrade to market perform with a lower target price (TP) of 63sen: Yesterday, Hua Yang Bhd announced that it is acquiring fourparcels of freehold land measuring 19.8 acres (8ha) for a totalconsideration of RM70 million or at RM81.3 per sq ft (psf). Theland is adjacent to the Kajang 2 development and is accessible viaJalan Reko via the Kajang SILK Highway.

We were surprised with Hua Yangâs land banking move as we werenot expecting any land banking activities for the year, given itshigh net gearing of 0.70 times (as of second quarter ended Sept 30,2017 [2QFY18]).

Hua Yangâs management estimates a gross development value(GDV) of RM800 million for these four parcels of land, which webelieve is fair as it would translate to an average selling priceof RM300 psf derived from four times plot ratio, enabling them toposition its product below RM500,000 per unit in the Klang Valleyfor the affordable segment. In terms of land cost, we deem that itis reasonable as the land cost to GDV ratio of 8.8% is still withinour comfortable range of 15% to 20%.

While we are positive with its land bank replenishment, weremain worried about its high net gearing of 0.70 times (as of2QFY18) which is set to reach 0.82 times upon completion of thedeal.Going forward, we are not expecting any more major landbanking activities as we believe that Hua Yang needs to focus onrealising their pipelines and also future plans with Magna PrimaBhd.

Considering its unbilled sales, which have fallen to ahistorical low of RM209 million, which is only sufficient foranother one to two quarters, we opine that Hua Yang should be moreaggressive driving its sales from launched projects that received aslow response from the market, inspite of its positioning as anaffordable housing player (more than 50% of products priced aroundRM550,000 per unit) in the Klang Valley, Penang and Johor.

As we believe that the average selling price of RM300 psf forits Kajang land is reasonable in the long term, we think that HuaYang will need to step up its marketing efforts, as it is set toface stiff competition from other developers in Kajang, given thatthe current pricing for condo/apartments ranges between RM240 psfand RM260 psf.

Following its land banking move, we maintain our financialyear ending March 31, 2018 (FY18)/FY19 earnings for now as we areonly expecting the earliest launch from these four parcels of landto take place in FY20.Risks to our call includeslower-than-expected sales, higher-than-expected administrativecosts, negative real estate policies, less conducive lendingenvironments, and lower-than-expected dividend payout. â KenangaResearch, Dec 28

Extracted from The Edge Financial Daily, on December 29,2017

Retrieved from:http://www.theedgemarkets.com/article/hua-yang-acquires-four-parcels-land-kajang-rm70m

Question 2

Based on the article below, tt has always been companiesâ aimto have a favourable receivables turnover ratio. Discuss differentstrategies that Midas Holdings can implement in order to reduce itsreceivable turnover in days.

HOT STOCK: MIDAS UP ON S$7.7 MILLION MARRIED DEAL

Wed, JAN 24, 2018 - 11:11 AM

SHARES of Midas Holdings - a maker of aluminium parts used intrains - surged on Wednesday, following a S$7.7 million marrieddeal of some 44 million shares at S$0.175 a piece, two traders toldBT. The buyers and sellers remain unknown, the sources said.

The stock rose 1.1 Singapore cents to S$0.171 in early morningtrading, or up nearly 7 per cent. More than 200 million shareschanged hands as at 11.24am. It was the most actively tradedcounter on the Singapore Exchange (SGX) on Wednesday morning. Thetrading volume on Midas on Wednesday is about five times itsaverage three-month volume.

This follows news earlier this month that Midas' associatecompany had clinched 2.68 billion yuan (S$552 million) of newcontracts. CRRC Nanjing Puzhen Rail Transport Co, in which Midasholds a 32.5 per cent stake, secured the contracts to supply metrotrain cars in China.

The first contract is worth 1.15 billion yuan, and was awardedby MTR Technology Consultation (Shenzhen) Co for the third phase ofthe Shenzhen Line 4 project. Delivery is set between February 2019and September 2020.

The second contract, for the first phase of the Hangzhou MetroLine 6 project, is worth 1.09 billion yuan. The third contract,worth 440 million yuan, is for the Hangzhou-Fuyang Inter-city MetroProject. The second and third contracts were jointly awarded byHangzou Metro Group Co and Hangzhou Hangfu Rail Transit Co. Bothcontracts are due between September 2018 and August 2019.

For the three months ended September 2017, Midas reported thatrevenue rose 11.5 per cent to 458.5 million yuan, and net profitrose 6.6 per cent to 24.1 million yuan.

Trade receivables, however, rose 8.7 per cent to 2.4 billionyuan over the same period, drawing a query from the SGX. Inresponse to the regulator's questions, Midas said that averagetrade receivables turnover was 268 days as major customers in Chinahave been slow in payment since the railway accidents in2011.

Extracted from The Business Times, 24 January 2018

Financial Statement Analysis ProjectâA Comparative Analysis ofOracle Corporation and Microsoft Corporation

Here is the link for the financial statements for OracleCorporation for the fiscal year ending 2011. First, select 2011using the drop-down arrow labeled Year on the right-hand side ofthe page, and then select Annual Reports using the drop-down arrowlabeled Filing Type on the left-hand side of the page.

You should select the 10k dated 6/28/2011 and choose to downloadin PDF, Word, or Excel format.

http://www.oracle.com/us/corporate/investor-relations/sec/index.html

Here is the link for the financial statements for MicrosoftCorporation for the fiscal year ending 2011. You need to press theword Go on the left-hand side of the page. Then you shouldselect the 10k dated 7/28/2011 and choose to download in Word orExcel format.

http://www.microsoft.com/investor/SEC/default.aspx?year=2011&filing=annual

A sample project template is available for download in DocSharing. The sample project compares the ratio performance ofTootsie Roll and Hershey using the 2012 financial statements ofTootsie Roll and Hershey provided at their websites.


Description

This course contains a Course Project. You will be required tosubmit one draft of the project at the end of Week 5 and the final,completed project at the end of Week 7. Using the financialstatements for Oracle Corporation and Microsoft Corporation,respectively, you will calculate and compare the financial ratioslisted further down this document for the fiscal year ending 2011and prepare your comments about the two companiesâ performancebased on your ratio calculations. The entire project will be gradedby the instructor at the end of the final submission in Week 7, andone grade will be assigned for the entire project.


Overall Requirements

For the Final Submission

Your final Excel workbook submission should contain thefollowing items. You cannot use any software but Excel to completethis project.

A completed worksheet title page tab, which is really acoversheet with your name, the course, the date, your instructorâsname, and the title for the project.

A completed worksheet profiles tab that contains a one-paragraphdescription regarding each company with information about theirhistories, what products they sell, where they are located, and soon.

All 16 ratios for each company, with the supporting calculationsand commentary on your worksheet ratio tab. Supporting calculationsmust be shown either as a formula or as text typed into a differentcell. The ratios are listed further down this document. Yourcomments for each ratio should include more than just a definitionof the ratio. You should focus on interpreting each ratio numberfor each company and support your comments with the numbers foundin the ratios.

The Summary and Conclusions worksheet tab is an overallcomparison of how each company compares in terms of the majorcategory of ratios described in Chapter 13 of your textbook. A niceway to conclude is to state which company you think is the betterinvestment and why.

The Bibliography worksheet tab must contain at least yourtextbook as a reference. Any other information you use to profilethe companies should also be cited as a reference.

Required Ratios for Final ProjectSubmission

Earnings per Share of Common Stock

Current Ratio

Gross Profit Margin

Rate of Return on Sales (Net Profit Margin)

Inventory Turnover

Daysâ Inventory Outstanding (DIO)

Accounts Receivable Turnover

Daysâ Sales Outstanding (DSO)

Asset Turnover

Rate of Return on Total Assets (ROA)

Debt Ratio

Times Interest Earned Ratio

Dividend Yield (For the purposes of this ratio, useYahoo Finance to look up current dividend yield and stock price;just note the date that you looked up thisinformation.)

Rate of Return on Common Stockholdersâ Equity (ROE)

Free Cash Flow

Price/Earnings Ratio (Multiple) (For the purpose of thisratio, for Oracle, use the market price per share on May 30, 2011and for Microsoft, use the market price per share on June 30,2011.)

The Excel files uploaded inthe Dropboxes should not include any unnecessary numbers orinformation (such as previous years' ratios, ratios that were notspecifically asked for in the project, etc.).

Here are some of theMicrosoft Ratios â (first 12) to ensure you are on the righttrack.

1. EPS â $2.73

2. Current ratio â 2.6

3. Gross profit rate â 77.7%

4. Profit margin ratio â 33.1%

5. Inventory turnover â 14.8

6. Day in inventory â 25 days

7. Receivable turnover â 5.0

8. Average Collection Period â 73 days

9. Asset Turnover Ratio â 0.72

10. Return on Assets Ratio â23.8%

11. Debt to Total AssetsRatio â 47.5%

12. Times Interest Earned â96.2

Thank you.

maroonferret375

ACCO 400 Lecture Notes - Lecture 5: Contingent Liability, Net., Information Asymmetry

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