Log in
HomeTextbook Notes300,000CA170,000

ADMS 2500 Chapter Notes - Chapter 11: Toronto Stock Exchange, Canada Business Corporations Act, Dividend Tax

257 views14 pages
School
York University
Department
Administrative Studies
Course
ADMS 2500
Professor
Romi Lee Sevel

For unlimited access to Textbook Notes, a Class+ subscription is required.

ishvindersinghsandhu and 38251 others unlocked
ADMS 2500 Full Course Notes
12
ADMS 2500 Full Course Notes
Verified Note
12 documents

Document Summary

Issuances of shares for assets other than cash. Two economic resources of a firm: non owners provide funds to a firm this is shown on the balance sheet as liabilities, owners provide funds this is shown on the balance sheet as owners(cid:284) equity. Three major advantages to incorporation: the corporate form provides the owner (shareholder) with limited liability. If the corporation becomes insolvent, creditors(cid:284) claims are limited to the assets of the corporate entity. The corporation(cid:284)s creditors cannot claim the assets of the individual owners. Corporations must pay income tax on earnings whether or not earnings are distributed to shareholders. Remaining earnings, distributed as dividends are taxed again in the shareholders(cid:284) hands. Dividends received from canadian corporations are eligible for a dividend tax credit. Depending on the individual(cid:284)s personal tax rate, this can largely eliminate the double taxation: corporations are generally subject to more government regulation and supervision than unincorporated businesses face.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related Documents

ADMS 2500 Chapter Notes -Dividend Policy, Quick Ratio, Dividend Yield
beigewallaby231
ADMS 2500 Chapter Notes - Chapter 2: Financial Statement, Cash Flow Statement, Accounts Payable
orangemammoth792
ADMS 2500 Chapter Notes - Chapter 2: Revenue Recognition, Accounts Payable, Income Statement
cerisecockroach845

Related Questions

The simplified balance sheet for Rensselaer Felt (in thousands) is as follows:
Cash and marketable securities $3,100 Short-term debt $77,200
Accounts receivable 121,600 Accounts payable 63,600
Inventory 126,600 Current liabilities $140,800
Current assets $251,300
Property, plant, and equipment 306,800 Long-term debt 210,200
Deferred taxes 46,600
Other assets 87,400 Shareholders' equity 247,900
Total $645,500 Total $645,500

The debt has an interest rate of 7.50% (short term) and 9.50% (long term). The expected rate of return on the company's shares is 16.50%. There are 7.62 million shares outstanding, and the shares are trading at $40. The tax rate is 35%. Assume the company issues $50 million in new equity and uses the proceeds to retire long-term debt. Also assume the the company's borrowing rates are unchanged and the short-term debt is permanent.

Calculate the cost of equity after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Cost of equity %

Calculate the WACC after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

WACC %

The simplified balance sheet for Rensselaer Felt (in thousands) is as follows:
Cash and marketable securities $3,100 Short-term debt $77,200
Accounts receivable 121,600 Accounts payable 63,600
Inventory 126,600 Current liabilities $140,800
Current assets $251,300
Property, plant, and equipment 306,800 Long-term debt 210,200
Deferred taxes 46,600
Other assets 87,400 Shareholders' equity 247,900
Total $645,500 Total $645,500

The debt has an interest rate of 7.50% (short term) and 9.50% (long term). The expected rate of return on the company's shares is 16.50%. There are 7.62 million shares outstanding, and the shares are trading at $40. The tax rate is 35%. Assume the company issues $50 million in new equity and uses the proceeds to retire long-term debt. Also assume the the company's borrowing rates are unchanged and the short-term debt is permanent.

Calculate the cost of equity after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Cost of equity %

Calculate the WACC after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

WACC %

Consolidated Balance Sheets - USD ($) $ in Millions Dec. 31, 2016 Dec. 31, 2015 Dec. 31, 2016 Dec. 31, 2015 Change
Current assets:
Cash and cash equivalents $ 522 $ 936 1.80% 3.46% -1.66%
Accounts receivable, less allowances of $131 and $57, respectively 938 571 3.23% 2.11% 1.12%
Restricted cash 8,444 0.00% 31.18% -31.18%
Prepaid expenses 88 100 0.30% 0.37% -0.07%
Income taxes and other current assets 108 80 0.37% 0.30% 0.08%
Total current assets 1,656 10,131 5.71% 37.41% -31.70%
Property, plant and equipment, net 14,902 8,493 51.36% 31.36% 20.01%
Goodwill 9,674 7,166 33.34% 26.46% 6.89%
Other intangibles, net 2,662 1,143 9.18% 4.22% 4.95%
Other assets 119 151 0.41% 0.56% -0.15%
Total assets 29,013 27,084 100.00% 100.00% 0.00%
Current liabilities: 0.00% 0.00% 0.00%
Long-term debt due within one year 363 384 1.25% 1.42% -0.17%
Accounts payable 698 467 2.41% 1.72% 0.68%
Advanced billings 301 160 1.04% 0.59% 0.45%
Accrued other taxes 134 87 0.46% 0.32% 0.14%
Accrued interest 437 403 1.51% 1.49% 0.02%
Pension and other postretirement benefits 23 33 0.08% 0.12% -0.04%
Other current liabilities 488 359 1.68% 1.33% 0.36%
Total current liabilities 2,444 1,893 8.42% 6.99% 1.43%
Deferred income taxes 2,516 2,666 8.67% 9.84% -1.17%
Pension and other postretirement benefits 1,602 1,163 5.52% 4.29% 1.23%
Other liabilities 372 240 1.28% 0.89% 0.40%
Long-term debt 17,560 15,508 60.52% 57.26% 3.27%
Equity:
Preferred stock, $0.01 par value (50,000 authorized shares, 11.125%, Series A, 19,250 shares issued and outstanding)
Common stock, $0.25 par value (1,750,000 authorized shares, 1,192,986 issued, and 1,172,553 and 1,168,200 outstanding, at December 31, 2016 and 2015, respectively) 298 298 1.03% 1.10% -0.07%
Additional paid-in capital 5,283 6,034 18.21% 22.28% -4.07%
Accumulated deficit (460) (87) -1.59% -0.32% -1.26%
Accumulated other comprehensive loss, net of tax (387) (353) -1.33% -1.30% -0.03%
Treasury common stock (215) (278) -0.74% -1.03% 0.29%
Total equity 4,519 5,614 15.58% 20.73% -5.15%
Total liabilities and equity $ 29,013 $ 27,084 100.00% 100.00% 0.00%
Questions
1. Evaluate the asset, liability, and equity structure, looking for trends and changes in the common-size balance sheet.
2. What concerns would investors and creditors have based only on this information?
3. What additional financial and non-financial information would investors and creditors need in order to make an investment and lending decisions?