First Investment Inc.

First Investment Inc.
Financial Managment – First Investments, Inc.: Analysis of Financial Statements Team 4: Nathalie
Strookman, Dieter Wolfram, Demis Busropan Background Problem Definition The 1994 Basic
Industries annual report shows a decline in the return on owners' equity. This has got the portfolio
people worried. An analysis has to be made of the way the company has achieved its return on
equity over the last 10 years. The focus should especially be on the 1993–1994 period and the
quality of the returns on equity of 1985 and 1994 should be compared, as well as other key financial
ratios. By doing these financial analysis we hope to find out why the return on shareholders' equity
is varying in time. {draw:frame} {draw:frame} {draw:frame} ... Show more content on
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In addition, if a firm borrows money, a greater part of the profits is absorbed by interest which is
reflected in a lower debt burden ratio. When looking at the graphs presented in the results section,
we can compare the different ratios with the return on equity. We see a fluctuation over the years
with the lowest return on equity in 1988, which was 14.87%. If we compare the course of the
operating profit margin with the return on equity we can see many similarities. In 1988 the profit
margin was also the lowest (5.10%) over the years. This lower profit margin leads to a lower amount
of money per sales and thus decreases your return on equity. So in time, every year the profit margin
increases the ROE increases and vice versa. A comparable relationship can be drawn between asset
turnover and return on equity, where we also see that an increase in turnover generates more sales
per unit of asset which leads to a higher ROE and vice versa. The product of the profit margin and
asset turnover make the return on assets. Comparing the graph of the ROE and ROA we can clearly
see the effect of ROA on ROE. Every time the return on assets increases, the return on equity also
increases.
Over the years we see a steady increase in leverage ratio which means that the company makes use
of more debt to finance its operations. Furthermore, a decrease in debt burden can be found because
of the interest the company has to pay to its creditors which in turn leads to absorption of
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Fin 320 Week 2 Individual Assignment Assignments from the...
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Problem P2–12 Debt analysis Springfield Bank is evaluating Creek Enterprises, which has requested
a $4,000,000 loan, to assess the firm's financial leverage and financial risk. On the basis of the debt
ratios for Creek, along with the industry averages and Creek's recent financial statements (on the ...
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On the basis of the debt ratios for Creek, along with the industry averages and Creek's recent
financial statements (on the facing page), evaluate and recommend appropriate action on the loan
request. Ratio Definition Calculation Creek Industry
Debt 0.73 0.51
Times
Interest Earned 3.00 7.30
Fixed
Payment
Coverage
+ {[(Principal + Preferred Stock
Dividends)] ´ [1¸ (1 – t)]}
+ {[($800,000 + $100,000)]
´ [1¸ (1 – 0.4)]} 1.19 1.85
Because Creek Enterprises has a much higher degree of indebtedness and much lower ability to
service debt than the average firm in the industry, the loan should be rejected Problem P2–13
Common–size statement analysis a common–size income statement for Creek Enterprises' 2005
operations follows. Using the firm's 2006

Swot Analysis Of Penney 's Performance And Financial...
A firm's performance and financial standing can be measured by a number of valuations and
techniques. Financial data is used to perform a financial analysis on a business to determine the
company's stability, profitability, and liquidity. For instance, J.C. Penney's financial stability was
drastically damaged leaving all external and internal stakeholders questioning the value of the
department store. J.C. Penney's has a number of stakeholders that should always be satisfied while
making business decisions. One of J.C. Penney's most valuable stakeholders is its customers. J.C.
Penney's customers expect the retailer to provide them with up–to–date products at an affordable
cost, while also expecting trained personnel to attend to their needs. One of J.C. Penney's main goal
is to get new and repeated customers; therefore, it is critical for J.C. Penney's to develop a strong
understanding of its customer base. During J.C. Penney's failure, many customers reported that
employees did not make an effort to develop a professional relationship with them. In addition to
keeping customers happy, J.C. Penney must focus on its internal stakeholders, especially its
employees. In order for the business to be successful, its employees must be satisfied, and expect to
have job security, perks such as employee's discounts, and schedule flexibility. J.C. Penney expects
its employees to be dependable, friendly with customers, and to always keep the organization's best
interest in mind.

Financial Ratios Have Proven To Be A Useful Tool For...
Financial ratios have proven to be a useful tool for effective financial management and planning.
Primarily known for improving the understanding of financial results and trends over time, financial
ratios are a unique way to provide a quantitative analysis to communicate overall organizational
performance. This tool is useful for managers to focus in on the company's strengths and
weaknesses from which strategies and operations can be formed. Investors are also commonly
known to use ratios to measure results against other companies to make appropriate judgments
regarding management effectiveness and mission impact. For ratios to be deemed meaningful and
useful, they require reliable and accurate calculated information. This is simple ... Show more
content on Helpwriting.net ...
2016 current ratio would also indicate an increase of $0.45 from 2015's current asset to liabilities
ratio. The second ratio (often viewed as more conservative than the current ratio) used to calculate
the liquidity of Starbucks was Cash Assets. A short–term creditor may be extremely interested in this
ratio because it measures cash over current liabilities. After the calculation was performed, records
indicate $0.47 in cash assets for every $1 in total liabilities. Cash assets also proved to have a $0.05
increase in cash assets from the previous year of 2015. The trend of Starbucks represents, in short,
that Starbucks current ratio deteriorated from 2015 to 2016, and their cash assets slightly improved
from 2015 to 2016.
SOLVENCY
Solvency is another word for debt management when discussing financial statements. Simply put,
ratios used in a solvent manner, measures a company's ability to meet its obligations or its financial
leverage. Companies are encouraged to be mindful of their financial leverage ratios as to keep their
financial risk at an acceptable level (2014, pp. 512). When performed correctly, a business will have
a favorable outcome as they make preparations to seek loans from financial institutions.
Common ratios used include debit to equity and equity

Ust Case Study
CAPITAL MARKETS AND FINANCING SPR 13 | Group Assignment 1 | UST Case Study |
2/19/2013 | | |
|
Question 1:
In order to calculate the impact of the leverage recapitalization on UST's value, we used the WACC
and APV methods to calculate its value before and after the recapitalization.
WACC Method
Using the WACC method, we first derived UST's return on assets (rA). Since we are given the firm's
market capitalization, debt and cash, we calculated the current Enterprive Value of UST. We were
then able to derive the return on asset as a function of UST's market value. Specifically, we followed
the below steps: 1. We estimated $467.8 million as the free cash flow of UST in 1999 based on the
given assumption that its ... Show more content on Helpwriting.net ...
Considering UST only had short–term debt issues prior to the recapitalization, and that credit ratings
depend on maturity of debt issued, we cannot simply rely on the commercial paper ratings to
extrapolate. We assume that rating will be A based on competitors' ratings as well as UST's overall
financial standing. We then use this assumption to calculate the value of the company using the two
methods above.
We assume linear increase in the EBIT and EBITDA at 3% for 1999 from 1998 figures. Considering
the debt will be long–term, we test both 10– and 20–year corporate yields as interest rates to see
what would be the coverage ratios, using the 1999 projected figures. | Interest Coverage Ratios
(Based on 10–year interest rates) | 1999 | AAA | AA | A | BBB | BB+ | BB/BB– | BB | Interest Rate |
5.60 | 5.84 | 6.12 | 6.84 | 7.70 | 8.72 | 11.19 | EBITDA Interest Coverage (x) | 14.44 | 13.85 | 13.21 |
11.82 | 10.50 | 9.27 | 7.23 | EBIT Interest Coverage (x) | 13.86 | 13.29 | 12.68 | 11.34 | 10.08 | 8.90 |
6.93 | | Interest Coverage Ratios (Based on 20–year interest rates) | 1999 | AAA | AA | A | BBB | BB+
| BB/BB– | BB | Interest Rate | 6.47 | 6.76 | 7.05 | 7.82 | –– | –– | –– | EBITDA Interest Coverage (x) |
12.50 | 11.96 | 11.47 | 10.34 | –– | –– | –– | EBIT Interest Coverage (x) | 11.99 | 11.48 | 11.01 | 9.92 |
–– | –– | –– |
Based on the calculations of the EBIT and EBITDA

American Home Products Corporation ( Ahp )
Staff Analysis
Statement of the Problem American Home Products Corporation (AHP) is currently considering
various alternatives to its current capital structure policy, in light of recent speculation concerning
the retirement of Chief Executive Officer William F. Laporte. The company's historical fiscal
conservatism and risk–aversion have provided years of steady growth, and its frugality and tight–
financial control have led to consistently improving earnings. If the company were to adopt a more
financially aggressive capital structure by issuing debt and repurchasing common stock, it could
potentially enhance equity returns. AHP must review its current and future financial needs, and
decide among four different capital structure alternatives; it may maintain current debt–free policy,
or target a debt to total capital ratio of 30%, 50%, or 70%. If the company does issue bonds, it must
also determine terms of the debt.
Discussion
AHP operates four primary lines of business: prescription drugs, packaged or over–the–counter
drugs, food products, and housewares and household products. The company's operational focus is
on superior marketing rather than internal product development, and it avoids the risk of research &
development or new–product introduction. Instead, the company acquires products and licensed
pharmaceuticals in order to source new merchandise. The company's diversified revenue stream and
unique operational focus make comparable analysis difficult, but there

Mercury Athletic: Valuing the Opportunity Essay examples
Summary
The background of this paper we need to mention is that West Coast Fashions, Inc. (WCF), a large
designer and marketer of branded apparel announced a strategic reorganization calling for a
divestiture of certain assets, and one of the divisions it intended to shed was Mercury Athletic, its
wholly owned footwear subsidiary. John Liedtke, the head of business development for Active Gear,
Inc. (AGI), a privately held athletic and casual footwear company, contemplated an acquisition
opportunity of Mercury that would significantly improve his business. So, he wanted to evaluate this
opportunity.
This paper introduces the basic situation and feathers of current athletic and casual footwear
industry and raises that active management of ... Show more content on Helpwriting.net ...
Also using the average tax rate of 40%, we can estimate the unlevered beta. Unlevered beta =
1.5578/[1+(1–0.4)*0.249]=1.355316 Levered beta = 1.355316[1+(1–0.4)*0.25]=1.558613 After–tax
cost of debt = 0.06*(1–0.4)=0.036=3.6%
Cost of equity = riskless rate + Beta (Risk premium) = riskless rate + Beta (riskless rate – expected
market return) = 4.69%+ 1.558613*(9.7%–4.69%)=0.124987=12.4987%
WACC= Cost of Equity* Weight + After–tax Cost of Debt* Weight = 12.4987%*(1–
20%)+3.6%*20%=0.10719=10.719%
If the leverage increases from expected level, D/C will increase, the levered beta will increase, the
cost of equity will increase, the after–tax cost of debt will keep the same. In addition, the weight of
the after–tax cost of debt will increase and the weight of the cost of equity will decrease. It looks
like that it is difficult to determine how WACC will change. However, according to the Figure 3–8
about the effects of capital structure in Chapter 15, we can find that when the debt ratio is 40%,
WACC reaches the minimum value, so in this case, when the leverage change from 20% to 40%,
WACC will decrease, and when the leverage bigger than 40%, WACC will increase.
On the other side, if the leverage decrease from

Accounting Ratio And Financial Structure
(A)
In the following analysis, we choose profit margin ratio for to analyze profitability and debt to
equity ratio to analyze financial structure.
CCA and RGP are two companies in the beverage industry; both companies have reported an
increase in profit during the 2014 financial year. The profit margin ratio can helps us to compare
how efficient does the two companies use their resources. The debt to equity ratio helps us to
measure the use of leverage and risks of the two companies.
(B)
CCA is a leading company in the beverage industry in Australia offers a wide range of products in 4
different countries. During the 2014 financial year, the company's profit margin was increased by
2.9% due to the reduction in company's expense. The debt to equity ratio was decreased by 22.6%
due to the decreases in financial liabilities. RGP is a small to medium size company in the beverage
industry offers limited products in the domestic market. During the 2014 financial year, the
company's profit margin was increased by 4.1% due to the increase in revenue and reduction in
expenses. The debt to equity ratio was decreased by 16.5% due to the increase in net profit, capital
shares and decrease in financial liabilities.
In CCA, the intangible assets reassessment expense has decreased by 300.8 Million compare to
previous year and no onerous contract signed during the year 2014 cause the expense decreased by
another 50.7 million, which lead an increase in company's profitability. For

Sample Selection And Resource Of Data
3. Data and methodology 3.1. Sample selection and resource of data In this study, we tested the
empirical effect that a firm's capital structure has on its corporate value by using a multiple
regression estimator framework. All the financial data are obtained from the China Stock Market
and Accounting Research (CSMAR) Database. The sample used for this study are automobile firms
listed on the A–share section of Shanghai and Shenzhen Stock Exchanges. Because of significant
differences between A and B stock markets in China and the lack of horizontal comparability of
financial statements for companies listed in different markets, only A–share listed companies are
selected. The determination of sample size is based on the availability of data. The steps followed to
create the data sample are: 1. ST and PT firms are dropped to avoid impacts of any non–economic
factors on the accuracy of analysis. These companies are in abnormal financial situations, or have
operating losses for more than two consecutive years. 2. Exclude any firms that listed after 2011 due
to the time period of four years in the analysis. Because developments of just listed companies are
not stable and their performance is of great volatility, excluding them can guarantee the stability of
the sample and avoid deficiency of data. 3. Exclude any firms that have insufficient data on selected
variables for 2010–2014. As a result, the final sample covers annual data for 2011–2014, up to 40
automotive firms

The Determinate And Impact Of Optimal Leverage Ratio
The Determinate and Impact of Optimal Leverage Ratio
Leverage ratio is a key factor of a company which is closely related with company's capital
structure, financing cost and financial strength. Many research paper analyzed how to determine the
optimal leverage ratio and explained why companies should use leverage.
Theoretical Literature
Pareja (2008) built theoretical model about weighted average cost of capital (WACC) of companies
which use leverage finance. They argued that the traditional opinion that believed leverage ratio was
the most important factor in determine WACC and when leverage ratio is constant, WACC is
constant does not hold true when pricing finite free cash flow. They used a numerical example
showed that WACC is depend on the discount rate which is used to pricing tax shield. If we assume
that the discount rate for tax shield is simply cost of debt and leverage ratio is constant, WACC will
not be constant. In this case, they must make some more assumption other than constant leverage
ratio to ensure the constant WACC. In the end, they found that the sufficient conditions of constant
WACC are 1. There is enough EBIT to fully earn the tax shield, 2. Taxes are paid when accrued, 3.
The risk of TS is cost of unleveraged cost, 4. Tax rate T, is constant, 5. Interest rate on debt is equal
to the (market) cost of debt.
Empirical Literature
Castro (2016)'s research built a model to describe the target leverage and speed of adjustment across
three life cycle

Portfolio Management Quize1
1.High Color Detergent is issuing new shares of stock which will trade on NASDAQ. If Sue
purchases 300 of these shares, the trade will occur in which one of the following markets? Primary
2. Wilson just placed an order with his broker to purchase 500 of the outstanding shares of GE. This
purchase will occur in which one of the following markets? Secondary 3.Hi–Tek Shoes is a private
firm that has decided to issue shares of stock to the general public. This stock issue will be referred
to as a(n): initial public offering4. A firm that specializes in arranging financing for companies is
called a(n): investment banking firm5.The process of purchasing newly issued shares from the issuer
and reselling those shares to the general public is ... Show more content on Helpwriting.net ...
and the NYSE is the most important auction market.32. The total dollar return on a share of stock is
defined as the: capital gain or loss plus any dividend income 33. One year ago, you purchased 400
shares of Southern Cotton at $38.40 a share. During the past year, you received a total of $480 in
dividends. Today, you sold your shares for $41.10 a share.What is your total return on this
investment? [$41.10 – $38.40 + ($480/400)]/$38.40 = 10.16 percent 34. Todd purchased 600 shares
of stock at a price of $68.20 a share and received a dividend of $1.42 per share. After six months, he
resold the stock for $71.30 a share. What was his total dollar return? 600 × ($71.30 – $68.20 +
$1.42) = $2,712 ;35. Which one of the following is generally true concerning securities held in street
name?The brokerage firm is the owner of record.36. The bid price is the price at which a dealer is
willing to purchase a security.37. The ask price is the price at which a dealer is willing to sell a
security. 38. The difference between the price at which a dealer is willing to buy, and the price at
which a dealer is willing to sell, is called the bid–ask spread.39. You want to sell shares of stock at
the current price. Which type of order should you place?Market 40. You purchased XYZ stock at
$50 per share. The stock is currently selling at $65. Your gains could be protected by placing a stop–
loss order 41. An order to sell that involves a preset trigger point

A Note On Financial Leverage
A financial leverage ratio gives the stakeholders an understanding of the long–term affluence of a
firm in the hospitality industry. This ratio measures a hotel's ability to meet its long–term debt
obligations. The debt ratio is total debt divided total assets. Hotels have a lot of long–term liabilities
in the form of debt, along with current liabilities. A lot of long–term assets are needed to
successfully run a hotel, and therefore long–term debt financing is also needed. The debt ratio is
used to measure a hotel's ability to meet its long–term debt obligations. For the hotel industry, it is
important to have low debt ratios, meaning long–term assets greatly outweigh the debt used to
purchase them. The profitability ratios measure a ... Show more content on Helpwriting.net ...
This ratio is used to measure the amount of net profit earned on the revenue a company generates.
For the hotel industry, profits are not going to be very high, as there are high operating costs to run a
hotel. But a stakeholder should always look at a company's net profit margin and compare it to the
industry average to ensure it meets and surpasses the benchmark. All of the information regarding
financial ratios in the hotel industry was found on invetopedia.com. Within the hotel industry, there
are always going to be trends that have to be followed. According to Kelly McGuire and the Cornell
Center for Hospitality Research, there are ten global trends that will impact the hotel industry in
2015 and 2016. The ten trends range from the millennials becoming the new power segment to
sustainability and resource constraints. Let's take a look at these ten trends a little more in detail.
The first recognizable trend for the hotel industry is that the millennials are becoming the new
power segment, and they are becoming the fastest growing customer segment in the hotel industry
and they are expected to represent 50% of all travelers by the year 2025. With this rise, not just
hotels, but any business will need to become more transparent and tech savvy, while also having a
strong focus on responsiveness and a strong customer connection. Since technology is essential for
the millennials, they will expect

Term Debt Instruments That Were Issued By Shoppers
a) The current liabilities reported at December 31, 2011 of Shoppers Drug Mart Limited's 2011
annual financial statements is comprised of the following: Bank indebtedness, commercial paper, AP
& accrued liabilities, income taxes and dividends payable, current portion of long–term debt,
provisions and associate interest. Together these financial statement line items make up a total of
$1,776,238 for Shoppers Drug Mart Limited's current liabilities.
i. Bank indebtedness – consists of the amounts of the available bank lines of credit that were utilized
by the Associate–owned stores of Shoppers Drug Mart at December 31, 2011 ii. Commercial paper
– short–term debt instruments that were issued by Shoppers to meet its current liabilities balance. ...
On top of this claim, Shoppers is also involved in other legal claims arising in the normal course of
business. Management believes that neither of these claims will have a significant effect on the
company's financial position and results. The balance which is stated for provisions under current
liabilities is recorded by management based on their best estimate of these final settlements.
c) Shoppers Drug Mart Limited's current ratio and quick ratio for December 31, 2011 and the two
preceding fiscal periods have been calculated below.
Shoppers Drug Mart Limited is not in a good financial position in terms of liquidity and being able
to pay out its liabilities. Over the three above indicated fiscal periods, Shoppers had a current ratio
on average of 1.54, which means that it has $1.54 of current assets available to cover each $1 of
current liabilities. The higher the current ratio is for a firm, the better position the company's
liquidity position is. Over the course of a year or over the course of the company's operating cycle
(whichever is longer), resources would be tight for Shoppers but they would be able to pay out their
current obligations as the current ratio is greater than 1. In the time period less than a year or the
operating cycle, repayment of the firm's liabilities may prove to be challenging. The quick ratio also
measures a company's liquidity position but there

Financial Statement Analysis of Amazon.Com Essay
Financial Statement Analysis of Amazon.com, Inc.
Introduction
The purpose of this essay is to perform financial statement analysis on Amazon.com, Inc.
(NASDAQ: AMZN ). We start with an introduction of Amazon and its industry. We then evaluate
the company's financial position, liquidity, operating capability and financial flexibility using
different ratios. To evaluate the financial performance of Amazon.com, Inc we disclose recurring
NICO and do full ROE disaggregation.
Amazon.com's stock price increased from $44.29 per share at the end of fiscal year 2004 to $134.52
per share at the end of fiscal year 2009. Earnings per share increased from $0.63 to $2.06. The stock
closed at $118.87 on 02/01/2010.
Recommendation
Amazon.com is ... Show more content on Helpwriting.net ...
The three liquidity ratios show Amazon has very good liquidity, which means it could easily satisfy
current liabilities with current assets. Comparing to Amazon, Ebay is even more liquid as it could
satisfy its short term liabilities purely by cash and cash equivalents. | | Amazon.com | | | eBay | | |
2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2009 | 2008 | Current Ratio (to one) | 1.33 | 1.30 | 1.39 | 1.33
| 1.52 | 1.57 | 2.32 | 1.70 | Quick Ratio (to one) | 1.04 | 1.00 | 1.07 | 0.99 | 1.22 | 1.27 | 2.32 | 1.70 |
Cash Ratio (Acid Ratio) (to one) | 0.86 | 0.79 | 0.84 | 0.80 | 1.04 | 1.10 | 1.10 | 0.86 | | | Table 2 | | | | | |
Financial Flexibility
Financial flexibility (Solvency and leverage) is a company's ability to adapt to unforeseen events
and opportunities. Leverage means using debt (or other third party funds) to increase earnings for
the owners. Table 3 presents some financial flexibility and leverage ratios of Amazon.com from
2005 to 2009 and for Ebay from 2008 to 2009. Amazon.com is a fast growing company and in the
fiscal year ended 2004, they had a negative total equity, which could skew the ratios. Therefore, we
did not present the ratios in 2004.
From table 3 we can see that at the end of fiscal year 2009, both Amazon.com and eBay have high
financial flexibility due to low or even zero long–term debt. Their usages of leverages are both low.
Although a company should try to use

Debt Policy at Ust Inc.
Executive Summary
As the leading manufacturer in the moist smokeless tobacco industry, UST Inc. has long been
recognized by its ability to generate high profit using low financial leverage. With a dominant
market share of 77%, the company maintains a pricing power that allows it to institute annual price
increases without losing costumers. However, UST's market share was eroded significantly in recent
years by price–value competitors who enter the market with lower prices. Although UST responded
to these threat by introducing new products, market share still decreased by 1.6% over past 7 years.
In addition, UST is also exposed to an unfavorable legislative environment, in which the company is
under advertising and product promotion ... Show more content on Helpwriting.net ...
In a market with taxation, the value of the levered firm equals to the value of the unlevered firm plus
the present value of interest tax shield.
Because management assumes that the new debt is constant and perpetual, the present value of
interest tax shield equals to the amount of debt multiplied by the effective tax rate, which is 38%.
Thus, the present value of UST's future tax saving should be 38% * $ 1 billion, which is $380
million.
At the end of 1998, the market equity of UST was $6,470.8 million based on the average shares
outstanding and year–end stock price. If UST borrows $1 billion debt immediately, the total value of
the levered firm would be $6,470.8 million unlevered value plus $380 million tax shield, which is
$6,850.8 million.
Because firm value will rise to $6,850.8 million immediately after the recapitalization
announcement, original shareholders will capture the full benefit of interest tax shield since they are
able to sell their stocks at a higher price. The new stock price is determined by dividing the value of
the levered firm by the number of shares outstanding at the end of 1998. Since there were 185,
516,055 shares outstanding at year end 1998, the new stock price after the announcement of
recapitalization would be $6,850.8 million divided by 185, 516,055, which is $36.93. Compared to
the

Essay about Hill Country Snack Foods Co.
Assignment for Corporate Finance
Assignment
Major
:
Group
:
Name
:
1 i) How much business risk does Hill Country face?
Hill Country Snack Foods Company manufactures, markets, and distributes snack foods and frozen
treats throughout the United States. Hill Country is overall well performed company. Sales, Net
Income, ROE and ROA had increased at a steady rate. Company mainly focused on maximizing the
shareholder value by the CEO and other management's managerial philosophy. Currently, Hill
Country uses a risk adverse strategy to choose their business or project. Hill Country's industry is
high competitive but it kept going well with cost efficiency and ... Show more content on
Helpwriting.net ...
(Assume that the amount of debt issued to reach the target debt–to–capital ratio is going to be
maintained forever. Use the tax rates assumed in the attached Excel file).
EPS, DPS and ROE increase when the company uses debt as the number of shares decrease and
earnings available to shareholders and bondholders increases due to tax shield. Assuming constant
P/E ratio, stock price also increase compared with no debt. Assuming constant dividend yield, stock
price also increase when the company use debt. EPS and DPS are maximized when the company
maintains debt–to–capital at 40%.
No debt
20% debt
40% debt
60% debt
Earnings per share
$2.88
$3.20

$3.31
$3.10
Dividends per share
$0.85
$0.96
$0.99
$0.93
Return on equity
12.51%
16.36%
20.54%
26.19%
Earnings available to shareholders and bondholders $97.59 $99.06 $102.12 $109.48
Cash payments to shareholders and bondholders $28.80 $32.61 $39.57 $56.29
Present value of debt tax shield at a corporate tax rate of 35% ($ m)
$ – $ 50.75 $ 101.50 $ 152.25
PV per original number of shares
(33.8834 million)
$ – $ 1.50 $ 3.00
$ 4.49
PV assuming Tc=35%, Tpe=15% and Tpd=35%
$ – $ 21.75 $ 43.50 $ 65.25
PV per original number of shares
(33.8834 million)
$ – $ 0.64 $

A Firm 's Total Market Value
The results obtained from the cooperation of Modigliani and Miller in 1958, was an attempt to prove
that the financial decisions should not be significant in the perfect conditions of the market, after
being published the Modigliani and Miller theory became the main theory of the capital structure.
In the M&M theory it suggested that the market is fully efficient, meaning that there are no taxes,
however in the theory Modigliani and Miller included the taxes to be able to reflect their theories in
reality, and the theory also suggested that there are no bankruptcy costs.
There are three propositions that were published by Modigliani and Miller which are:
Proposition 1: A firm's total market value is independent of its capital structure. ... Show more
Modigliani & Miller applied their theories with two modules, one which doesn't include the taxes
and this is their first findings, and another one with taxes to make it more realistic.
The First Proposition without taxes:
In this part Modigliani & Miller stated that the firm's value is not affected by the structure of the
capital between Equity and Debt, They proved this by having an example of two firms that has got
the same conditions in everything, same cash flow, same operational risks and same opportunity
costs. One of the firm's capital structure is all equity and the other firm's capital structure is a
mixture between equity and debt, since the form of financing (debt or equity) can neither change the
firm's net operating income nor its operating risk, the values of levered and unlevered firms will be
the same.
They have concluded that the value of the levered firm = the value of the unlevered firm, only if
they have the same conditions, same risk levels, cash and opportunity cost.
This approach were formed without applying the taxes, but with including the taxes it should be as
the following:
The First Proposition with taxes:
In this section Modigliani and Miller applied the first proposition approach with taxes, findings to
this is that the capital structure directly impact the firm's market value, this is because M&M found

Different Factors Affect Profitability Indicators Among
Different factors affect profitability indicators among different industries
by
Thuy Nguyen
Advisor: Professor Sami Keskek
An Honors Thesis in partial fulfillment of the requirements for the degree Bachelor of
Science in Business Administration in Accounting. Sam M. Walton College of Business
University of Arkansas
Fayetteville, Arkansas May 12, 2017
Introduction (1 page)
Review of Literature (1 page)
Study Methodology (1 page)
Industries Sectors
Healthcare
Consumer Discretionary
Consumer Staples
Materials
Industrial
Energy
IT
Financials
Real Estate V. Conclusion VI. Bibliography
Introduction
I also want to become an investor. So I want to know how investors use ... Show more content on
Helpwriting.net ...
Many professional investors look for a ROE of at least 15%. It means they want at least 15% profit
on every dollar invested by shareholders
ROA = annual net income/total assets
How much profit a company earns for every dollar of its assets.
Assets include things like cash in the bank, accounts receivable, property, equipment, inventory and
furniture.

Few professional money managers will consider stocks with an ROA of less than 5%.
A bank's ROA is typically well under 2%, low ROAs
Technology companies have very few assets so they will often have high ROAs.
ROE is different from ROA because of financial leverage = debt. Debt ampllifies in relation to ROA
ROE does not say much about how well a company uses its financing from borrowing and bonds.
ROE can be impressive but not effective at using the shareholders' equity to grow the company.
ROA help you see how well a company puts both these forms of financing to use.
Review of Literature
Some literature about Financial Ratios, how they are important to investors.
How investors use Profit indicators and predict future
III. Study Methodology In this thesis, I will use Regression to analyze the relation between specific
profit indicators (ROA, ROI..) and other factors (COGS, depreciation, amortization..)
Besides those financial ratios calculated in

Value Analysis Of Nestle
. We can see that the value for this ratio in Nestlé is roughly 0,41. In order to avoid liquidity
problems, the ratio's value must be closed to 1, but we can see that the value for this ratio in Nestlé
is roughly 0,41. Since it is quite lower, it means that Nestlé has risk of bankruptcy, due to the fact
that, with the resources owned in short term, the company cannot pay back its short–term liabilities.
This could be related to the fact that Nestlé has a very high bargaining power that could useful for
them in order to exercise their power on suppliers to negotiate their payment commitments.
SOLVENCY RATIO AND LIQUIDITY RATIO By means of solvency ratio, short–term assets are
compared with short–term liabilities and it shows the liquidity situation of the company's cash. It is
also known as working capital ratio or solvency ratio at short term.
Nestlé has admitted that their negative working capital is not a desirable situation and they must
work on this aspect. But is this situation a real risk? Comparing the collection period and the credit
period of the company, we see that the last one is higher and it has been increased over the years, ...
This is mainly due to a remarkable margin ratio, which is considerably higher than the others. In
contrast, the turnover is slightly lower but similar to the mean, and the leverage ratio is also inferior
in comparison to other companies which mean that Nestlé manages to finance its assets with a
smaller proportion of debt than other firms in the same industry. On 2011, the ROE of Nestlé was a
little higher than the average of the other companies, but lower than 2012 by approximately 3
percentage points. Looking at the ratios we can find easily the explanation: every one of them is
lower than the ones from 2012. If we compare the ratios to the average of other companies, the
margin ratio is also higher, but the turnover and the leverage

Prada Case Analysis
"FINANCE" Course
"PRADA: TO IPO OR NOT TO IPO: THAT IS THE QUESTION, AGAIN" case analysis
Brief summary of the case with the emphasis on managerial problems that Prada faces.
Prada currently requires a significant amount of capital both to re–finance debt that is maturing in
the next six to twelve months and to finance its intended growth into the Asian (especially Chinese)
markets. Since financial markets are aware of Prada's pressing need to raise capital, it is important
for the board of directors to develop a credible strategy for raising the necessary capital of at least €1
billion. Although the press has been suggesting that Prada will do an initial public offering, the
company has tried this several times in the ... Show more content on Helpwriting.net ...
Equity IPO in HK 1.higher valuation than listed in Europe 2. aim to the Asia market 1.HK market
has lower liquidity 3.potential tax problem HKDR 1. listed in Milan but also can be bought and sold
by investors in HK. 2.help future negotiation in China 3. may have lower valuation than IPO in HK
4. higher cost than IPO Strategic partnership 1.current price for PE transaction is attractive 2.higher
premium 1. higher cost than other alternatives 3. may cause partially loss of control of the
corporation Debt Traditional corporate bond 1. easily priced 2 2. further potential financial problem
3. higher leverage ratio
4. How would you recommend the board of directors proceed? One of the best solutions for Prada to
solve this problem is to raise capital in the stock market, which we could refer as IPO. Given the
current market conditions, listing in Hong Kong might appears to be the best choice after

At & T Inc. Essay
AT&T Introduction: AT&T Inc. (AT&T), consolidated on October 5, 1983, is a holding company.
The Company is a supplier of communications and computerized entertainment benefits in the
United States and the world. The Company works through four sections: Business Solutions,
Entertainment Group, Consumer Mobility and International. Its administrations offerings
incorporate remote communications, information/broadband and Internet administrations,
computerized video administrations, neighborhood and long–separate telephone administrations,
telecommunications hardware, oversaw systems administration and discount administrations
(www.digitaltrends.com). The Company offers administrations and items to buyers in the United
States, Mexico and Latin America, and to organizations and different suppliers of
telecommunications administrations around the globe. The Company likewise claims and works
roughly three provincial games networks, and holds interests in another territorial games organize
and a system devoted to diversion related programming, and additionally Internet intuitive
amusement playing (www.digitaltrends.com). Financial Analysis: Particulars Dec 31, 2015 Dec 31,
2014 Dec 31, 2013 Current Ratio 75% 90% 66% Quick Ratio 75% 90% 66% Return on Equity %
19.91 7.02 12.77 AT&T Inc. 's current ratio in the year 2015 was 75% and its quick ration was also
75%. AT&T's profitability ratios are: Gross margin ratio is 54% and operating margin ratio is 17%.
The Return on Assets in the

Speedster Athletics Case Study Essay
Part I
One of the key roles of social media from a marketing perspective is the development of a client
based platform. It is becoming an increasingly important part of any business's marketing.
Businesses can utilize existing online platforms to build networks of current and potential clients.
By being active online allows businesses to connect with their customers in innovative ways to
become a trusted source of information and convey the passion they have for their industry.
Social media is different from more traditional marketing tactics as it offers a free platform that is
easily accessible to anyone with internet access. This allows for the increase communication for
organizations to foster brand awareness and often, and ... Show more content on Helpwriting.net ...
Some key determinants of a successful social media promotional campaign is measuring brand
reach or viewers, and the level of engagement interacting with the promotional message. Level of
influence can inspire followers to take some kind of action such as engaging with your message or
making a purchase. Measurables such as tracking social media traffic to a company's website or
even time spent on a specific page, viewing of various products and other such actions can also
provide valuable data. These are all relevant from a marketing perspective in evaluating increased
brand awareness or appeal of interest to the promotional campaign.
Part II
Speedster Athletics Company– 2011 – Ratio Questions
1. ROE 2.25% – If this ROE went up it means Speedster Athletics is improving on generating profit
from assets (without requiring as much debt) and have a better competitive advantage by creating
more wealth to shareholders. If ROE went down Speedster is financially over leveraged may have
been making high risk investments which is impacting stockholder value.
2. EPS $1.02 – If EPS goes up it Speedster is generating more profit on behalf of its owners, making
the common shares more valuable. If this number is going down, it means the company has
probably taken on additional debt which in effect is diluting share value. This indicates the
company's

Boeing Airlines And The Defense Market Essay
Company's Market
Boeing may only be one company, but they compete in two different markets: commercial airlines
and the defense industry. The main competition in the commercial airline market is Airbus. Airbus
and Boeing seem to have the commercial airline industry in a chokehold basically having no other
competitors. Since the industry has high barriers to entry they will not see much competition
anytime soon. Boeing is the American leader in commercial airplanes and Airbus is the European
leader, which means they are constantly battling. Their competing aircrafts are the Airbus A380 and
the Boeing 747. Both companies have many variations of their respected aircraft and according to
Business Insider, Airbus' A380 outranks the Boeing 747 based on cost, range, size and luxury.
The defense market, Boeing aligns itself in is more complex than their commercial airline market.
Boeing's main competitor in this market is Lockheed Martin and Raytheon Company. Even though
all these companies may compete, each with each other they often create joint ventures because the
defense industry requires a diverse product mix that one company may not be able to fulfill. One
example of these ventures is when Boeing and Lockheed Martin come to together to own/operate
Hellfire Systems, LLC which allows for both companies to sell AGM–114 Hellfire Missiles. This
missile is used in the United States Army, Navy and Air Force so this is a very profitable venture for
both Lockheed Martin and Boeing.

The Coca Mass Foods And Bisco Misr
Looking at the DuPont Analysis it is clear that General Mills has the slow and steady strategy when
it comes to the three main factors profit margin, asset turnover and financial leverage. With that
consistency their return on equity has been steady in the 24% –28% ranges, where Kellogg has a
more volatile ROE. Kellogg over the years has done really well with asset turnover and keeping
their inventory at relatively low levels. However, Kellogg uses more leverage in comparison to
General Mills which helps inflate their ROE. General Mills has more debt but the ratio to their
assets shows a steady increase over the year which is steady with their profit margin.
Both companies see an avenue to increase profit margin by creating a healthier brand image and
growing their international business. This will help increase their return on equity through higher
profit margins globally. Last year, Kellogg acquired Mass Foods and Bisco Misr which are both
located in Egypt. They are hoping to expand a lot of their product into Africa through this new
avenue. General Mills also wanted to expand globally when they purchased Yokie, a company in
Brazil that specializes in organic foods. Each of these companies, as they expand more
internationally, faces more and more challenges with the general environment. Each has experienced
losses in Venezuela where the currency and economic downturn has affected their sales and overall
ROE. Nonetheless, they continue to expand globally where they are

Wal-Mart Stores Stock Market Project
Elizabeth Reel
Robert Kramer
Wal–Mart Stores, Inc.
Stock Market Project
April 22, 2007 Wal–Mart Stores, Inc.
History and Business Wal–Mart Stores, Inc. is the number one retailer in the world. They are
dedicated to low prices, great customer service and contributing to the community. Let me take a
few minutes to take you through the time–line of how Wal–Mart grew to be the corporation it is
today. The first Wal–Mart store opened in 1962 in Rogers. Arkansas. In 1969 Wal–Mart became
incorporated. The first distribution center opened in 1970 and Wal–Mart was put in the New York
Stock Exchange. By 1985 Wal–Mart had 882 stores and made $8.5 billion. In the 1990's Wal–Mart
became the nation's number one retailer and in 1991 ... Show more content on Helpwriting.net ...
We could create metrics and share best practices so our suppliers could make products that rely less
and less on carbon–based energy" (Lee Scott, President and CEO of Wal–Mart Stores, Inc., 2007).
Profitability Ratios With the exception of profit margin, Wal–Mart is above the industry average.
They have a lower return on assets and a higher return on equity than Target. This means that they
are borrowing more money and getting less return on their assets than that of Target. Target's profit
margin, though lower than the industry average, is higher than Wal–Mart. Wal–Mart's profit margin
is significantly lower than the industry average. However, their return on assets exceeds the industry
average of 8%. Basically, this means that Wal–Mart earns less on each sales dollar, but they balance
that by turning over their assets quicker. Industry averages were found on Reuter's web site (2007).
Asset Utilization Ratios Wal–mart's and Target's asset utilization ratios fluctuate to a great extent.
Wal–Mart turns its receivables way more often than Target does with an amazing 122.76 times. On
top of that, they have an extremely short collection period of about 3 days. Both Wal–Mart and
Target are above the industry average in turning over their inventory. Target is not as efficient in
utilizing its total and fixed assets to generate dollars as Wal–Mart, and is below the industry average.
Wal–mart is slightly under the industry

Cafe Monte Bianco
Café Monte Bianco
To analyze this case, the analyst conducted liquidity, solvency and profitability ratios for Cafés
Monte Bianco along with sales and income projections for operating the business under both private
label and premium brands. The analyst has found that the firm utilizes high leverage to achieve
ROE. Further, it is the opinion of the analyst that the firm should abandon private label brands and
market its own premium brand; thereby leveraging its industry reputation as a fine purveyor of
coffees.
Cafés Monte Bianco Liquidity Analysis: The current ratio is 0.57 and the quick ratio is 0.41. This is
due to higher liabilities and is an indicator of poor liquidity. The Inventory turnover ratio is a healthy
13.83, which means ... Show more content on Helpwriting.net ...
Since an ROE of 21.48% equals the product of 4.41% and 4.87 (ROA and Equity Multiplier), it
indicates that the firm is able to achieve such high ROE only through a high financial leverage.
Strategic Action for Cafes Monte Bianco: Assuming that they will be able to sell all produced
capacity, with 0% advertising, and with a 6,000,000 kg annual capacity [Exhibit 2 in case], CMB
should be able to generate revenues of 178,322,200,000 liras (Scenario 2). With resulting COGS of
114,954,330,000 liras and other expenses, they should still be able to generate a Net Income of
28,732,818,000 liras. Alternatively, if the company spent the equivalent of 10% of sales on
advertising, revenues will increase to 215.62 billion lira, and net profit to 25 billion lira. So the
company may be better off not advertising, at 0% (Scenario 3).
Pursuing Dino's Production Plan for only Private Brand (Scenario 1) will result in annual revenues
of just 52.8 billion liras, COGS of 42.91 billion liras and even with reduced advertising and selling
expenses, a resulting net loss of –1,138,659,000 liras, before taxes. This is clearly not a viable
strategy. Since the firm utilized only 39.13% of installed plant capacity in year 2000, they clearly
need to increase revenues and profit margins by pursuing their own premium brand, instead of
pursuing private label brands with higher volumes, but much lower profit margins, and an

A Project Analysis Of My Favorite Women Clothing Stores
Project Analysis This is a project analysis of my favorite women clothing stores; New York and
Company, Ann, Inc. and Express, Inc. The different inventories methods used by companies are
LIFO, FIFO, and weighted–average. The accounting method used by these three companies and
most retail industries is weighted average. This means that the company determines average cost for
the units on hand and applies that average unit cost to the next sale to determine the cost of goods
sold. (Ann Inc. Annual Report , 2015). Depreciation and amortization are computed on a straight
line basis for all three companies. (Ann Inc. Annual Report , 2015), (Express, Inc. Annual Report,
2015), (New York and Company Annual Report, 2015). Ann, Inc. PPE useful life of buildings is up
to 40 years, Leasehold Improvements is 10 years or shorter, furniture/fixtures is 2–10 years, and
software is 5 years. (Ann Inc. Annual Report , 2015). Express, Inc. PPE useful life of buildings is 6–
30 years, leasehold improvements is no longer than 15 years, furniture/fixtures is 5–7 years and
software is 3–7 years. (Express, Inc. Annual Report, 2015). New York and Company PPE useful life
for land, fixtures, and equipment is 3–10 years, office equipment is 3–15 years, and software is 5
years. (New York and Company Annual Report, 2015). In reference to comparing the earnings
trends for all three companies, Express, Inc. seemed to generate the most stable income. I used the
profit margin ratio to make

Teleus Ratio Analysis Essay
Ratio Analysis After reviewing Telus' liquidity ratios its clear from their current ratio that they will
be able to meet their short term obligations which is a major key in moving forward as they have
just acquired a lot of debt from capital expenditures. However, there is some room for concern as
their cash ratio is very low at 0.009 which hints that the company is having some cashflow
problems, if the problem is not dealt with major problems can arise from this. Also their financial
leverage ratio is higher than all their competitors indicating that they have the most debt out of all of
the companies, with cashflow problems and the amount of debt they have just borrowed this raises
more concerns if Telus would be able to repay its debt. In addition, their capital investments to
upgrade its network infrastructure to remain competitive Telus also had high debt to EBITDA ratio
of 3.4 over its competitors by almost 2.0 shows red flags that default warnings may be a concern in
the coming future. In comparison to other companies in the industry, Telus' ROE is 6.5% which is
significantly ... Show more content on Helpwriting.net ...
TELUS' new debt increased in relation to their total capital to 58.6% due to this purchase and also
the $6.25 billion in debt increased Telus' leverage. They also had increased debt as they had further
investment to upgrade their wireline network in 2001 as is was a major obstacle in satisfying
demand of their customers. Another factor that added to increased debt was the start of their
Operational Efficiency Program (OEP) which required further funds to get the project up and

Leverage Leadership
Great schools do not just happen. It is easy to envy successful schools and to equate their success to
things such as a wealthy community, readily accessible resources, a supportive community, low
diversity, and visionary leadership (Hollingsworth, 2016). While all of these factors certainly impact
a school's ability to reach high heights, successful schools are not built overnight. Successful
schools are led by diverse administrators who all share the ability to access the important leverages
of leadership. They are built on strong structures and driven by continual improvement over long
periods of time. They have have stakeholder involvement, and this includes the community which
they serve. The employees in these schools work well together, embrace each other's diversity, and
create and follow well planned curriculums that target the needs of their students. ... Show more
Paul Bambrick–Santoyo has outlined the super levers of leadership in his book Leverage
Leadership. Through his research, he has defined staff culture as one of the super levers of a
successful school. It is important to work throughout the year to ensure that a strong–staff
community is not treated as a one–time exercise but rather a habit of excellence. In these positive
school culture environments, teachers grow and improve their craft faster, staff retention increases
and collaboration becomes more effective, and continual improvement is achieved (Bambrick–
Santoyo, 2012). These great schools depend on the teachers. Exceptional staffing includes hiring
and training the correct people from the onset. Schools must have recruiting, interviewing and hiring
practices that increase the potential for hiring the right people. Once the right people are in place, it
is critical to provide them with the mentoring, monitoring, coaching, and support that they need to
be successful in their

Essay On Leverage
Blog #23_ Leverage_ What is The Best Leverage for Your Forex Trading Strategy
Introduction
Understanding how to trade forex isn't always the easiest of tasks, as in order to successfully turn a
profit a trader must have a detailed knowledge of the market, the right trading strategy, and a
selection of functional trading tools. One tool that is commonly praised is leverage, as through
correct use it can boost a trader's output without the need for any additional capital upfront. The
following article takes an in–depth look at leverage, helping you get a grasp on what leverage is
appropriate for your forex trading strategy and all round market approach.
What is leverage?
Before we delve into the pros and cons of using leverage, it is ... Show more content on
Helpwriting.net ...
The margin in this instance would be $1,000, with margin based leverage equalling 100:1
(100,000/1,000). Many don't equate margin–based leverage to being "legitimate" leverage, as it
doesn't affect a trader's risk exposure, as a trader's margin requirement might not influence his or her
profits or losses. Reason being that a trader can choose to allocate more than the required margin for
any active position.
Real Leverage
In order to understand the real degree of leverage within any position you are undertaking, you must
divide the total value of your positions by your trading capital. For example, should you have
$10,000 in your account and you choose to open a $100,000 position, by default you are trading
with 10x leverage. Now, should you trade two standard lots ($200,000) instead of a single standard
lot ($100,000), you will then be trading at 20x leverage. You can probably start to figure out how
this works from a real leverage perspective using these examples, with the leverage offered being
related to the level of margin and the discretion of the broker.
Understanding associated levels of risk
As you can plainly see, by making use of leverage you can magnify not only your profits, but should

things take a turn for the worse, your losses as well. Think about it this way, the greater the level of
leverage you use, the greater the level of risk you take on. What this means is that leverage can

Home Depot Operating Leverage
Companies employ operating leverage when they use proportionately more fixed costs that variable
costs to magnify the effect on earnings of changes in revenue (Edmonds, Tsay, & Olds, 2011, p.57).
Home Depot utilized the accounting concept of operating leverage, which justifies why the
percentage change in a company's net earnings is typically greater than the corresponding
percentage change in its revenues. As operating leverage increases (decreases), both the overall and
systematic volatility of the stock's return increases
(decreases) (Lev, 1974, p.628). At the same time, the company incurred a 3 percent decrease in
sales, which caused a 21 percent decline in profits (Edmonds, Tsay, & Olds, 2011, p. 147). This
demonstrates a change in sales,

Effectiveness Of Leverage And Financial Leverage
Introduction
Leverage is the achievement of things that would otherwise have been hard to accomplish
(Bobinaite, 2015). Scholars use the time–series regression techniques to estimate the degree of
leverage measures (Lord, 1998). Leverage can also be defined as the ability for a firm to use fixed
cost assets (debentures and preference shares act as a fulcrum) or funds to generate more returns to
its owners (Bobinaite, 2015). This will enable them to earn more than what they would using their
own capital resources. If the earnings before interest and taxes exceeds the fixed return requirement
then leverage is considered to be favorable (Gibson, 2013). Leverage is usually discussed in two
distinct ways; operating leverage and financial leverage (Lord, 1998).
Leverage also known as the debt to equity ratio measures how much of the company is financed by
its debt holders compared with its owners and it is another measure of financial health (Gibson,
2013). A company with a large amount of debt will have a very high debt to equity ratio, whereas
one with little debt will have a low debt to equity ratio (Gibson, 2013). Companies with lower
leverage are generally less risky than those with higher debt to equity ratios (Gibson, 2013). In this
paper, I will discuss the relation between Return on Investment (ROI) and Return on Equity (ROE).
I will also discuss the leverage relation between Earnings before interest and taxes (EBIT) and net
Income.
Financial leverage is the use of long

Firm Size 's Impact On The Access Of Capital Markets
1.2 Thesis Statement
My Main thesis statement is:
"Firm size has an impact on the access to capital markets"
My main aim is to examine if there is truly a relationship between the amount of debt firms hold and
the firms size. Larger firms these days seem to be able to borrow large amounts of money than that
of smaller firms. I will approach this statement by focusing on the size of the firm itself by using
their Total Assets value and relating this to their long term debt figure. I gathered a sample data of
274 firms within the UK of various sizes and debt levels and I will use the data gained to determine
whether a relationship truly exists.
1.3 Main Findings
The amount of debt a company held varied throughout my data gathered from ... Show more content
on Helpwriting.net ...
Profitability provided a negative relationship with financial leverage while Ratio of Tangibility
provided a positive relationship. These both agree with our theory however they were again
statistically insignificant and therefore we reject the null hypothesis.
1.4 Layout
The aim of this paper is to identify if certain variables are determinants of financial structure. I have
structured the paper in the following way. In section 2 I have carried out a literature review on this
topic from historical papers and past researchers. I have also stated the hypothesis's that I will be
testing and why. Section 3 contains the data set I will be using, the variables included and my
methodology approach and how I am going to test my hypothesis. In section 4, which is the main
part of my paper contains my results in table format along with detailed explanations of these results
while also testing if they are statistically significant. The final section, section5 I have commented
my outcomes and possible way to enhance these results in the future.
2. Literature Review
The determinants of financial structure have been looked on a consistent basis over many years.
Recently it has been looked at in extreme detail due to the Financial Crisis which has had a major
impact on firms due to the

The On The Bank Of Canada Website
Problem 1
a) Base on the Bank of Canada website, as of December 31, 2014, the total balance outstanding of
Treasury Bills and Bonds is 628,665,887,500("Government of Canada Treasury Bills and Domestic
Marketable Bonds Outstanding", 2016), as of April 30, 2016, the total balance outstanding of
Treasury Bills and Bonds is 655,400,506,500 ("Government of Canada Treasury Bills and Domestic
Marketable Bonds Outstanding", 2016)
What happened: The total balance outstanding of Treasury Bills and Bonds is increasing.
I would invest in bonds.
2 examples of fixed–income:
Preferred stock, corporate bonds
Additional risk:
Interest rate risk: When the interest rate goes up, the bond price will goes down.
Inflation risk: When the inflation comes ... Show more content on Helpwriting.net ...
Second, when the growth happens for the stock, the investor can achieve more money. Third, the
investor can avoid inflation through buying stocks.
Investing call options: First, to achieve the benefits from differences in price. If the future price
increases, the investor can sell it at a higher price to get benefit. Second, investing call options can
reduce transaction exposure. Third, the investor can achieve leverage effect and take advantage of
the leverage effect to do the transaction.
Investing put options: First, to achieve the benefits from differences in price as well. Second, the
investor can achieve leverage effect. Third, investing put options can protect book profit.
c) Cumulative returns:
S&P/TSX is: 8.10% Nikkei 225 is: –8.33% FTSE 100 is: 3.08% DAX is: –1.44%
Plot:
S&P/TSX:
Nikkei 225:
FTSE 100:
DAX:
How to calculate: Using excel. First finding out the price data from the beginning of 2016 to the end
of April on the internet (yahoo finance), and then using everyday's price to calculate the returns.

Base on the returns, using I dollar invest as a transaction to calculate the monthly cumulative
returns. Finally, adding monthly cumulative returns to get cumulative returns of these four months.
Highest performance and reasons: S&P/TSX: The highest performance is at the end of April, 2016
(April 29, 2016). Because mining stocks increased to a highest price

J. C. Penney's Financial Analysis
J.C. Penney's financials display fallen revenue of nearly twenty–seven percent since 2012, with its
lowest revenue reported in 2014. The company has also reported a net loss since 2012, including
losses of over 1.27 billion dollars in 2014. Moreover, J.C. Penney's earnings per–share has been
negative, which indicates how much money the company lost per share of outstanding stock.
Additionally, from 2012 to 2016, J.C. Penney's book value per–share has decreased by seventy–
three percent. This indicates that investors' evaluation on the price of the company's common stock
has become more pessimistic. More importantly, J.C. Penney has not paid dividends since 2013.
Eliminating paying dividends to shareholders is a clear indication that the ... Show more content on
Helpwriting.net ...
Penney human resource department has implemented programs to help its employees and maintain
the company's stability. For example, one of the key factors that helps J.C. Penney maintain its
position today is its global supply chain. J.C. Penney prides itself on being one of the largest
purchasers of apparel, which it achieves by maintaining a diverse supplier base. The company
manages this operation through its home office in Plano, Texas, its design studio in New York City,
eleven quality assurance offices throughout the globe, and nine international buying offices. More
than nine hundred fifty factories were used in thirty–two countries for the J.C. Penney private
brands production in 2014. J.C. Penney's success is based on having to build and sustain strong
relationships with their suppliers. J.C. Penney holds their suppliers to high standards in order to
maintain a business relationship. However, J.C. Penney helps improve its suppliers' social and
environmental standards by providing increased support, targeted auditing, and training, which will
provide suppliers the ability to develop and raise their own standards. In addition, J.C. Penney
receives various supplies and products internationally including: accessories, apparel, footwear,
furniture, and much more. Moreover, J.C. Penney operates internationally from Canada to Taiwan,
and many in–between (JCPenney,

The Strategy Of The Deutsche Brauerei Essay
After evaluating the Deutsche Brauerei, I am giving my recommendation to Greta Schweitzer on the
January 2001 Board of Directors meeting agenda. The items we will be focusing are
The approval of the 2001 financial budget.
The declaration of quarterly dividends.
The compensation scheme of Oleg Pinchuk.
On the 2001 financial budget, Deutsche Brauerei calls for a EUR 7 million investment in plant and
equipment to be built in the Ukraine. I believe this investment will not benefit Deutsche Brauerei for
the reason that Ukraine distributors have defaulted on their payments since 1998. Deutsche Brauerei
has relaxed their terms to 2% 10, net 80 and yet they have not been able to meet their due dates.
Based on this I recommend Greta to: Tighten credit policy toward the Ukrainian distributors. Slow
capital expansion towards Ukraine in order to collect outstanding receivables. Focus on isolated
cities in the Ukraine that are meeting company standards (Kiev, Odessa)
The debt at Deutsche Brauerei is consistently rising and something needs to be done so the firm
does not over leverage itself. Current analysis of the breakeven point, degree of operating leverage,
financial leverage, and combined leverage indicate the company is approaching diminishing returns
(see exhibit 1). Debt growth will need to be minimized and reduced in the future financial plan.
After viewing ratios, we see a significant increase in short term borrowings, consequently
witnessing long term borrowing

General Mills Generating Balanced Growth
General Mills – Generating Balanced Growth
From ready–to–eat cereal to convenient meals to wholesome snacks, General Mills is one of the
biggest food products manufacturers and competes in growing food categories that are on–trend
with consumer tastes around the world. The company markets many well–known brands, such as
Haagen Daazs, Yoplait, Betty Crocker, Totinos, and Cheerios, among others. Main rivals include
Kellogg, Kraft, Conagra Foods, and Sara Lee. General Mills sells its products in three segments:
U.S. retail (63% of net sales), International (25% of net sales), and Bakeries and Foodservices (12%
of net sales). In addition, General Mills sells cereals and ice cream through its Cereal Partners
Worldwide and Haagen Daazs Japan ... Show more content on Helpwriting.net ...
Efficiency improvement was primarily supported by inventory reduction efforts that, coupled with
increase in accounts payable derived from shifts in timing of payments, reduced the cash conversion
cycle to 43 days. It is worth noting that during fiscal 2012 the balance sheet had an important
growth as a result of the acquisition of the international Yoplait business, including goodwill and
other intangible assets of $2.3 bn USD. Sales growth also benefited from the acquisition and will be
discussed in the next section.
General Mills runs a leveraged operation where, in average, the total assets are 3 times shareholders
equity. Leverage ratio has decreased since 2010 as retained earnings have increased at a faster pace
than assets driven by strong business performance. A slight revamp in the leverage ratio during
fiscal 2012 was mainly driven by an increase in other comprehensive losses related to pensions and
postemployment activity, and foreign currency translation that offset retained earnings for the same
period.
Sustainable growth while generating strong levels of cash flows
General Mills has shown a strong, sustainable growth throughout the last years.
Net sales increase has been driven by a moderate average growth in the US Retail segment (3.8%),
coupled with the expansion in the International business (13.4%). The big year on year increase of

SWOT Analysis: Financial Analysis Of Hoaxia
Past Performances
Hoaxia has a good financial standing in this industry. In the past year, Hoaxia had an equal market
share with all of its competitors which is 12.5%. It has made a profit in all of the regions where they
were selling at. The total global profit from the previous year is $ 186,958,000. The profit gained in
the USA, Asia, and Europe is equal to $ 30,676,000, $ 66,155,000, and $ 90,127,000 respectively.
Ratios
Profitability Ratio:
It is important to know the profitability ratios for a company in order to be able to assess their ability
to generate profit as compared to its expenses and other costs. A higher ratio means that the
company is doing well.
Return on Equity (ROE):
ROE is the amount of net income that is returned ... Show more content on Helpwriting.net ...
Debt–to–Equity Ratio: This ratio compares the company's total debt to total equity. A higher number
means the company relies more on debt financing. A lower number usually indicates that the
company is more financially stable because it relies less on creditors. At Hoaxia, the ratio is 32.65%
SWOT Analysis
Strengths:
Hoaxia has a strong financial position. The have been making a profit in all of the regions that they
are selling at. They have $ 285,773,000 in cash and its equivalents. This is extremely beneficial
because it will help them to invest in research and development to add more features in their
technologies and to build more plants in order to be able to cater to a wider market share and to open
production plants in Asia.
Hoaxia has a proper management system that is effective in reducing their costs and increasing their
profit.
Weaknesses:
A major weakness is that Hoaxia does not have a production plant in Asia, this increases the

company's cost to produce and transport them from the USA to Asia. Increased costs makes it less
efficient for the company to generate as much profit as possible.

Impact Of Financial Leverage On Stock Return Volatility
Introduction to Leverage
Leverage is the ability to influence a system, or an environment, in a way that multiplies the
outcome of one 's efforts without a corresponding increase in the consumption of resources. In
different words, leverage is the advantageous condition of having a relatively small amount of cost
yield a relatively high level of returns. Indeed, it is extremely important to quantify the effect of
financial leverage on stock return volatility in a dynamic general equilibrium economy with debt
and equity claims. The effect of financial leverage is studied both at a market and a firm level where
the firm is exposed to both idiosyncratic and market risk. In a benchmark economy with both a
constant interest rate and constant price of risk, financial leverage generates little variation in stock
return volatility at the market level but significant variation at the individual firm level. In an
economy that generates time–variation in interest rates and the price of risk, there is significant
variation in stock return volatility at the market and firm level. In such an economy, financial
leverage has little effect on the dynamics of stock return volatility at the market level. Financial
leverage contributes more to the dynamics of stock return volatility for a small firm.
Advantages of Leverage
Leveraging business carries some specific benefits that don 't escort different ways of business
finance. First, leveraging a business carries some risks, however the

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