FIN-2860 Study Guide - Final Guide: Depletion-Load Nmos Logic, Disability Insurance, Lump Sum

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periwinklewombat647

24 Aug 2016

School

App State

Department

Finance, Banking and Insurance

Course

FIN-2860

Professor

Jonathan Allen

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Document Summary

Inflation risk, liquidity risk: can"t convert asset to cash. Balance sheet assets listed at fair market value in order of liquidity short term liabilities: anything due less than a year (ex. Credit card) long term: longer than a year (student loans, car loans, mortgage) (assets liabilities = net worth) Know debt ratio and liquidity ratio 1st and 3rd thing. Commercial banks: traditionally serves businesses and individuals w large amounts of money, organized as corporations, with investors providing the need for capital for the bank to operate. Savings and loan associations: specialize in savings accounts and loans for mortgages. Mutual savings banks: owned by depositors, specializes in savings accounts and mortgage loans, profits typically go to depositors, usually paying higher rates on savings. Certificate of deposit//savings plan requiring that a certain amount be left on deposit for a stated time period to earn a specific rate of return//penalty for early withdrawal.

Related Questions

NIKE:

Need the following ratios to be calculated using the financial sheets copied at the bottom. Each ratio needs to be calculated using the information from 2016. Each ratio also needs to be broken down and illustrated by the step by step process. Finally, please include any and all observations for each ratio and analysis.

1) Common Size analysis

2) Common size vertical analysis & graph

3) Current Ratio

4) Quick Ratio

5) Cash Ratio

6) Inventory Turnover

7) Receivables Turnover

8) Total Asset Turnover

9) Fixed Asset Turnover

10) Gross profit margin

11) Operating Profit margin

12) Net profit margin

13) Return on total assets

14) return on equity

15) basic earning power

16) Deb/net worth ratio

17) debt ratio

18) DuPont System

19) Times-interest-earned

Balance Sheet:

Consolidated Balance Sheets - USD ($) $ in Millions	May 31, 2017	May 31, 2016
Current assets:
Cash and equivalents	$ 3,808	$ 3,138
Short-term investments	2,371	2,319
Accounts receivable, net	3,677	3,241
Inventories	5,055	4,838
Prepaid expenses and other current assets	1,150	1,489
Total current assets	16,061	15,025
Property, plant and equipment, net	3,989	3,520
Identifiable intangible assets, net	283	281
Goodwill	139	131
Deferred income taxes and other assets	2,787	2,422
TOTAL ASSETS	23,259	21,379
Current liabilities:
Current portion of long-term debt	6	44
Notes payable	325	1
Accounts payable	2,048	2,191
Accrued liabilities	3,011	3,037
Income taxes payable	84	85
Total current liabilities	5,474	5,358
Long-term debt	3,471	1,993
Deferred income taxes and other liabilities	1,907	1,770
Commitments and contingencies
Redeemable preferred stock	0	0
Shareholdersâ equity:
Capital in excess of stated value	8,638	7,786
Accumulated other comprehensive (loss) income	(213)	318
Retained earnings	3,979	4,151
Total shareholdersâ equity	12,407	12,258
TOTAL LIABILITIES AND SHAREHOLDERSâ EQUITY	23,259	21,379
Class A Convertible Common Stock
Shareholdersâ equity:
Common stock at stated value	0	0
Class B Common Stock
Shareholdersâ equity:
Common stock at stated value	$ 3	$ 3

Income Statement:

Consolidated Statements of Income - USD ($) $ in Millions	12 Months Ended
Consolidated Statements of Income - USD ($) $ in Millions	May 31, 2017	May 31, 2016	May 31, 2015
Income Statement [Abstract]
Revenues	$ 34,350	$ 32,376	$ 30,601
Cost of sales	19,038	17,405	16,534
Gross profit	15,312	14,971	14,067
Demand creation expense	3,341	3,278	3,213
Operating overhead expense	7,222	7,191	6,679
Total selling and administrative expense	10,563	10,469	9,892
Interest expense (income), net	59	19	28
Other (income) expense, net	(196)	(140)	(58)
Income before income taxes	4,886	4,623	4,205
Income tax expense	646	863	932
NET INCOME	$ 4,240	$ 3,760	$ 3,273
Earnings per common share:
Basic (in dollars per share)	$ 2.56	$ 2.21	$ 1.90
Diluted (in dollars per share)	2.51	2.16	1.85
Dividends declared per common share (in dollars per share)	$ 0.70	$ 0.62	$ 0.54

Cash Flow Sheet

Consolidated Statements of Cash Flows - USD ($) $ in Millions	12 Months Ended
	May 31, 2017	May 31, 2016	May 31, 2015
Cash provided by operations:
Net income	$ 4,240	$ 3,760	$ 3,273
Income charges (credits) not affecting cash:
Depreciation	706	649	606
Deferred income taxes	(273)	(80)	(113)
Stock-based compensation	215	236	191
Amortization and other	10	13	43
Net foreign currency adjustments	(117)	98	424
Changes in certain working capital components and other assets and liabilities:
(Increase) decrease in accounts receivable	(426)	60	(216)
(Increase) in inventories	(231)	(590)	(621)
(Increase) in prepaid expenses and other current assets	(120)	(161)	(144)
(Decrease) increase in accounts payable, accrued liabilities and income taxes payable	(364)	(889)	1,237
Cash provided by operations	3,640	3,096	4,680
Cash used by investing activities:
Purchases of short-term investments	(5,928)	(5,367)	(4,936)
Maturities of short-term investments	3,623	2,924	3,655
Sales of short-term investments	2,423	2,386	2,216
Investments in reverse repurchase agreements	0	150	(150)
Additions to property, plant and equipment	(1,105)	(1,143)	(963)
Disposals of property, plant and equipment	13	10	3
Other investing activities	(34)	6	0
Cash used by investing activities	(1,008)	(1,034)	(175)
Cash used by financing activities:
Net proceeds from long-term debt issuance	1,482	981	0
Long-term debt payments, including current portion	(44)	(106)	(7)
Increase (decrease) in notes payable	327	(67)	(63)
Payments on capital lease and other financing obligations	(17)	(7)	(19)
Proceeds from exercise of stock options and other stock issuances	489	507	514
Excess tax benefits from share-based payment arrangements	177	281	218
Repurchase of common stock	(3,223)	(3,238)	(2,534)
Dividends â common and preferred	(1,133)	(1,022)	(899)
Cash used by financing activities	(1,942)	(2,671)	(2,790)
Effect of exchange rate changes on cash and equivalents	(20)	(105)	(83)
Net increase (decrease) in cash and equivalents	670	(714)	1,632
Cash and equivalents, beginning of year	3,138	3,852	2,220
CASH AND EQUIVALENTS, END OF YEAR	3,808	3,138	3,852
Cash paid during the year for:
Interest, net of capitalized interest	98	70	53
Income taxes	703	748	1,262
Non-cash additions to property, plant and equipment	266	252	206
Dividends declared and not paid	$ 300	$ 271	$ 240

Answer True or False to each of the next five (5) statements.

1. Treasury Bills are issued through competitive bidding process at discount from par.

2. In the capital market both short term and long term securities are traded, whereas only short term securities are traded in the money market.

3. Free cash flow represents the amount of money available to the firm, after it has met all operating needs and paid for investments in net fixed assets.

4. Three ratios of liquidity are net working capital, current ratio and acid - test ratio

5. The income statement represents changes within a time period, while the balance sheet reflects levels as at a particular period.

Choose the letter a, b, c, or d that carries the appropriate response:

6. _______________ Serve as intermediaries channelling the savings of individuals, businesses, and governments into loans and investments.

(a) Financial markets

(b) Financial institutions

(d) OTC markets

7. Of the following group of ratios, which would show the combined effect of liquidity, asset management and debt on the overall operating results?

(a) Liquidity ratios

(b) Debt ratios

(d) Profitability ratios

8. XYZ Company Ltd. has EBIT of $1,500,00 million and a 15% tax rate. It had $270,000 in depreciation expenses with a $250,000 increase in working capital. It had another $170,000 in capital expenditures. What is its free cash flow?

(a) $1,125,000

(b) $ 2,850,000

(d) $ 1,500,000

9. Fast Cash Limited charges 1 percent (%) per week on their loans. Assume there are exactly 52 weeks in a year. What is the effective annual rate?

(a) 55.36%

(b) 67.77%

(d) 57.35%

10. _________________ is an annuity that provides its holder with payment dollars at the beginning of each year.

(a) An annuity due

(b) A warrant

(d) An ordinary annuity

11. All of the following statements about bonds are true, except one. Choose the false statement.

(a) If the value of a bond, B_o, is less than its par value, the bond is selling at a discount.

(b) Bonds with short maturities will have less interest rate risk than bonds with longer maturities and equal features.

(d) The discount rate of a bond is synonymous with the bond's required return.

12. The present value of a bond's _____________________________ determines the value of the bond.

(a) Dividend

(b) Coupon payment and maturity value

(c) Coupon payment

(d) Maturity value

13. If the returns on one asset move in the same direction as the returns on another asset then the asset are:

(a) Positively correlated

(b) not correlated

(c) negatively correlated

(d) perfectly positively correlated.

14. Another term for non-diversifiable risk is:

(a) Systematic risk

(b) non- systematic risk

(d) both b and c

15. All of the following statements about stock valuation are true, except one. Choose the false statement.

(a) It is easier to value stock than it is to find the value of bonds.

(b) The value of a share of stock depends on the cash flows investors can expect to by owning that stock

(d) The present value of a stock's dividend determines the value of the stock.

ivorybutterfly448

1. Use the attached balance sheet and income statement to compute the required financial ratios for 2012. Use 360 for the number of days in a year. The computations for 2011 are already done for you.

Current ratio_________________________

Quick ratio__________________________

Inventor turnover____________________

Average Collection Period_____________

Total asset turnover__________________

Net profit margin____________________

Operating profit margin_______________

Times Interest Earned_________________

Debt/Net Worth Ratio_________________

Return on Equity ratio__________________

2. Using the computed financial ratios from question 1, compare Grounds Keeperâs performance from 2011 to 2012. Address what areas the company has improved and what areas it has not

A.)Liquidity

B.) Activity / turnover / efficiency

C.) Profitability

D.) Leverage / use of debt / solvency

3. If you were the CEO of Grounds Keeper, what area(s) would you concentrate on to improve the performance of the company?

4. Define the terms capital structure, cost of capital, and working capital. Focus on how they are different from each other and impact both profitability and risk.

5. Determine Grounds Keeperâs capital structure and working capital.

6. If Grounds Keeper has a required rate of return on its long-term debt of 9% (before taxes) and a required rate of return on its common stock, a tax rate of 40%, what is its weighted average cost of capital (WACC) for 2012? How could Grounds Keeper lower its WACC? (HINT: you will need to look at the balance sheet to determine the weight of debt to equity.

7. What are the advantages to Grounds Keeper in using money market instruments as financing? How does this related to financing net working capital?

8. Explain what Grounds Keeper should consider when deciding whether to issue stocks or bonds? Answer using at least 3 different characteristics comparing and contrasting stocks and bonds.

9. Define money market instruments; list at least one type of security that would be considered a money market instrument. What are the advantages to Grounds Keeper in using money market instruments as financing? What are the disadvantages?

	Grounds Keeper
	Consolidated Balance Sheets
	(Dollars in thousands)
	2012	2011
Assets
Current assets:
Cash and cash equivalents	78,240	44,395
Receivables	399,891	340,062
Inventories	844,737	736,677
Total current assets	1,322,868	1,121,133

Fixed assets, net	1,244,384	889,613
Other long-term assets	1,048,537	1,187,141
Total assets	3,615,789	3,197,887

Liabilities and Stockholdersâ Equity
Current liabilities:
Accounts payable	309,222	319,465
Accruals	201,017	145,240
Notes payable	9,748	6,669
Total current liabilities	519987	471374
Long-term debt	834574	814298
Total liabilities	1,354,561	1,285,672
Stockholdersâ equity:
Common stock, $0.10 par value:	15,268	15,447
Additional paid-in capital	1,464,560	1,499,616
Retained earnings	781400	397152
Total stockholdersâ equity	2,261,228	1,912,215
Total liabilities and stockholdersâ equity	3,615,789	3,197,887

Grounds Keeper

Consolidated Statements of Operations

(Dollars in thousands except per share data)

2012

2011

Net sales

3,889,426

2,642,390

Cost of sales

2,589,799

1,746,274

Gross profit

1,299,627

896,116

Selling and operating expenses

481,493

348,696

General and administrative expenses

219,010

187,016

Operating income

599,124

360,404

Interest expense

22,983

57,657

Income before income taxes

576,141

302,747

Income tax expense

212,641

101,699

Net Income

363,500

201,048

Basic income per share:

Average shares outstanding

154,933,948

146,214,860

Earnings per common share

2.35

1.38

Current Ratio	Current assets/ Current liabilities
Quick Ratio	Current assets â inventory/ Current liabilities
Inventory Turnover	Cost of goods sold/ Inventory
Receivables Turnover	Sales/ Accounts receivables
Average Collection Period	Receivables/ Sales per day
Fixed Asset Turnover	Sales/ Fixed assets
Total Asset Turnover	Sales/ Total Assets
Gross Profit Margin	Revenues - Cost of goods sold/ Sales
Operating Profit Margin	Earnings before interest and taxes/ Sales
Net Profit Margin	Net income/ Sales
Return on Total Assets	Net income/ Total assets
Debt/Net Worth Ratio	Total Debt/ Total Equity
Times-Interest-Earned	Operating Income/ Interest expense
Return on Equity	Net income/ Total equity

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FIN-2860 Study Guide - Final Guide: Depletion-Load Nmos Logic, Disability Insurance, Lump Sum

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