ACC E272 Lecture Notes - Lecture 1: Money Market Fund, Asset Turnover, Cash Cash

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24 Dec 2020

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Liquidity ratios- measures the company"s short term ability to pay its maturing obligations. Current ratio, acid-test ratio, current cash debt coverage. Activity ratios- measures of how effectively the company uses its assets ex. Profitability ratios- measures of the degree of success or failure of a given company or division for a given period of time. Profit margin on sales, return on assets, price- Coverage ratios- measures of the degree of protection for long term creditors and investors. Cash debt coverage, debs to assets ratio, free cash flow, times interest earned. Define it, how do we account for it, and how do we report it (classification & valuation) Cash- available to meet any and all current obligations, free from any contractual restrictions, available on demand, most liquid asset: standard medium of exchange, basis for measuring and accounting for all items, ex.

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Liquidity ratios indicate a company's short-term debt-paying ability. These ratios include: (Select all that apply). Each incorrect answer results in a negative point mark.

Select one or more:

a. Acid-test (quick) ratio.

b. Inventory turnover.

c. Accounts receivable turnover.

d. Cash flow liquidity ratio.

e. Total assets turnover.

f. Stock Value to Sales ratio.

g. Equity ratio.

h. Number of days' sales in accounts receivable.

i. Current, or working capital, ratio.

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Profitability tests are an important measure of a company's operating success. These tests include(Mark all that apply). Each incorrect answer results in a negative point mark.

Select one or more:

a. Acid-test (quick) ratio.

b. Times interest earned ratio.

c. Cash flow margin.

d. Times preferred dividends earned ratio.

e. Net income to net sales.

f. Inventory turnover.

g. Return to average common stockholders' equity.

h. Earnings per share of common stock.

i. Rate of return on operating assets.

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Market tests help investors and potential investors assess the relative merits of the various stocks in the marketplace. These tests include: (Mark all that apply). Each incorrect answer results in a negative point mark.

Select one or more:

a. Acid-test (quick) ratio.

b. Inventory turnover.

c. Dividend yield on preferred stock.

d. Dividend yield on common stock.

e. Earnings yield on common stock.

f. Cash flow per share of common stock.

g. Payout ratio on common stock.

h. Price-earnings ratio.

orchidjellyfish198

Gather info for Proctor &Gamble in 2016 for below. Please Help

Current

Prior

QUESTIONS

Year

Total cash received from the issuance of newdebt

Total cash paid to retire debt

Total amount due to all creditors

Current

NonCurrent

Short-term debt

The amount the company must pay to retire ALL ofits NOTES & DEBENTURES

Amount of long-term debt due each of the next fiveyears

Amount of interest costs expensed

Amount of interest costs capitalized

Compute the following ratios

current ratio

acid-test ratio

cash debt coverage

accts receivable turnover

inventory turnover

Comment on the company's liquidity

107

Fair value of all of the company's notes &debentures at the end of the current year?

Why might a difference exist between the book valueand fair value of debts (notes/debentures)?

Estimate the company's "cash" interest rate for thecurrent year

interest paid/ beg notes

Forecast the company's cash interest payment forthe upcoming year on long-term

0.0%

Estimate the total amount of cash the company willpay in principal and interest on long-term

Compute the following ratios

debt/total assets

times interest ernd

debt/equity

Comment on the company's solvency and financialflexibility.

Prepare a journal entry to record the purchase andretirement of the companyâs

long-term debt at the end of the current year at101% of its book value.

N/P

LOSS

CASH

109

Does the company own any derivative securities orengage in hedging transactions?

Describe

Does the company have any loss or gaincontingencies outstanding? Describe

106

1.) analyze ratios

liquidity ratios

LIQUIDITY Ratios	Are wemeeting our current obligations?
Working Capital	$ 7,143	$ 2,162	$ 2,357	$ (1,204)	$ 1,888
Current Ratio	1.55	1.51	1.52	1.57	1.52

2.) Solvency ratio: analyze the ratio

SOLVENCY Ratios	Are wehandling debt appropriately?
Financial LEVerage	2.82	2.95	2.91	2.74	2.94
Debt ratio	65%	66%	66%	64%	66%
Free Cash Flow	$ (1,066)	$ (2,048)	$ (3,067)	$ 6,225	$ 7,282

3.) Investment Appeal of Target analysis

Dividends per share	$ (1.10)	$ (1.32)	$ (1.58)	$ (1.90)	$ (2.13)
Market Value per share	$ 59.00	$ 56.00	$ 54.00	$ 53.00	$ 53.00
Dividend Yield	-1.87%	-2.37%	-2.93%	-3.59%	-4.01%
Price-to-Earnings (P/E) ratio	-53.49	-42.27	-34.14	-27.84	-24.91
Price-to-Sales (P/S) ratio	38.09	37.00	35.44	33.69	34.98
Price-to-Book (P/B) ratio	22.00	23.64	25.13	25.56	25.57

4.) Du pont Analyis analysis

DuPont Analysis of ROE = ROS xAsset turnover = ROA x Financial LEVerage = ROE
Return on Sales(ROS), also known as Net Profit Margin	4.19%	4.09%	2.77%	-2.25%	4.56%
Asset Turnover	1.60	1.57	1.48	1.63	1.79
Return on Assets (ROA)	6.70%	6.43%	4.09%	-3.67%	8.17%
Financial LEVerage	2.82	2.95	2.91	2.74	2.94
Return on Equity (ROE)	18.91%	18.96%	11.90%	-10.08%	24.03%

e.) How does your stack up against its competiton?graph/charts

(1.) is your company in attractive industry? Yes/No

(2.) What metrics determine superior companies for yourindustry?

f.) State your investment thesis-investment philosophy(graphs/charts) (target corporation ) 2011-2015

a.) Sustainability economic moats profitability ? your test yourcompany pass/fail explain

b) growth? stable? dividends ? your test yours company pass/failexplain

c.) financial health? financial risk? your test your companypass/fail explain

d.) quality of income? your test your company pass/failexplain

e.) good value? buy now your test your company pass/failexplain

This stock appears to be trading below/ about /over theprice.

g.) investment decisions (target corporation)

overall, this company is a long term buy/ review again at lowprice / bust )

Why? list 5 good reasons 1, 2, 3, 4, 5,

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ACC E272 Lecture Notes - Lecture 1: Money Market Fund, Asset Turnover, Cash Cash

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