Capital expenditure
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The bank manager met with the MD of HICL, a six-year-old consumer company going through rapid expansion. HICL is seeking medium-term financing of $1.2 million to consolidate operations across three locations into a new single office. The bank analyzed HICL's financial ratios and statements over several years, forecasted projections, and proposed a $1.25 million loan at 10% interest over 5 years, subject to certain conditions.
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Capital expenditure control
Capital expenditures (CAPEX) are funds used by a company to acquire or upgrade physical assets like equipment, property, or buildings to generate future benefits. CAPEX is evaluated using capital budgeting techniques like net present value (NPV) analysis, which discounts future cash flows to determine if a project's value exceeds its cost. The capital expenditure process involves generating investment proposals, evaluating proposals using methods like NPV, approving projects, and conducting post-completion audits to review project performance.
Capital Expenditures Presentation V3
The document discusses capital expenditures and tools for evaluating long-term investment decisions. It provides examples of how Netflix and AT&T used net present value (NPV) and internal rate of return (IRR) analyses to evaluate expanding their facilities. Both alternatives provided positive cash flows but expanding at the current facility was less capital intensive and avoided travel costs and time loss. The document also summarizes how Disney Cruise Line used NPV and IRR models to determine a new Mediterranean itinerary would have a 67% IRR and $6.4M NPV, leading them to approve the new route.
SKassegne - Effective Capex Management
Sultana Kassegne discusses effective capital expenditure (Capex) management at Cricket Wireless. She outlines their main Capex planning and management activities, including budgeting, forecasting, procurement, approvals, expenditure monitoring and reporting. She emphasizes the importance of cross-functional synergies between finance, fixed assets, accounting and other teams. Kassegne also provides tips for positioning an organization for successful Capex management, such as establishing policies, training, tools and key performance indicators.
Investment Appraisals
This document discusses various methods used for investment appraisal to assess whether investment projects are worthwhile. It describes payback period, accounting rate of return, internal rate of return, profitability index, and net present value. Net present value discounts future cash flows to account for the time value of money and allows comparison of projects. Internal rate of return identifies the discount rate that results in a net present value of zero. Investment appraisal helps firms evaluate projects and potential returns to determine which investments to make.
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1) Time value of money is an important concept in capital budgeting where the value of cash flows depends on when they occur due to interest rates.
2) To calculate the net present value (NPV) of a project, one discounts each cash inflow to its present value using the appropriate discount factor and sums these values, then subtracts the present value of cash outflows.
3) NPV is the preferred method for evaluating projects as it considers the timing of all cash flows, but payback period can also be considered to account for uncertainty in long-term cash flows.
Capital Expenditure | Finance
Any expenditure which is incurred in acquiring or increasing the value of a fixed asset is termed as capital expenditure. As such, the amount spent on the purchase of land and building, plant and machinery, furniture, etc. is capital expenditure. Copy the link given below and paste it in new browser window to get more information on Capital Expenditure:- www.transtutors.com/homework-help/finance/capital-expenditure.aspx
Hdbfm assignment group 06(2)
The document provides a summary of a presentation on investment appraisal and capital budgeting. It discusses Richard Branson's approach to starting businesses without extensive accounting involvement. It then summarizes the objectives and limitations of management accounting. The document outlines a proposed tea production and export project for Maltras International Ltd, including project costs, financing, financial projections, cash flow statements, and investment appraisal calculations. Based on the discounted cash flow analysis, the project has a positive net present value of Rs. 21,680,818, indicating it should be accepted.
Capital expenditure proposals
A capital expenditure proposal is a formal request to undertake projects to acquire or upgrade physical assets. The proposed projects will be ranked according to criteria like payback period, discounted payback method, net present value, and internal rate of return. There are different types of investment proposals such as mutually exclusive, contingent, and independent proposals as well as replacements. Key principles for capital expenditure proposals include carefully estimating costs, finding profitable opportunities, estimating future revenues and expenses, considering non-monetary factors, screening and selecting projects, and preparing necessary reports.
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Capital expenditure control
Capital expenditures (CAPEX) are funds used by a company to acquire or upgrade physical assets like equipment, property, or buildings to generate future benefits. CAPEX is evaluated using capital budgeting techniques like net present value (NPV) analysis, which discounts future cash flows to determine if a project's value exceeds its cost. The capital expenditure process involves generating investment proposals, evaluating proposals using methods like NPV, approving projects, and conducting post-completion audits to review project performance.
Capital Expenditures Presentation V3
The document discusses capital expenditures and tools for evaluating long-term investment decisions. It provides examples of how Netflix and AT&T used net present value (NPV) and internal rate of return (IRR) analyses to evaluate expanding their facilities. Both alternatives provided positive cash flows but expanding at the current facility was less capital intensive and avoided travel costs and time loss. The document also summarizes how Disney Cruise Line used NPV and IRR models to determine a new Mediterranean itinerary would have a 67% IRR and $6.4M NPV, leading them to approve the new route.
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Sultana Kassegne discusses effective capital expenditure (Capex) management at Cricket Wireless. She outlines their main Capex planning and management activities, including budgeting, forecasting, procurement, approvals, expenditure monitoring and reporting. She emphasizes the importance of cross-functional synergies between finance, fixed assets, accounting and other teams. Kassegne also provides tips for positioning an organization for successful Capex management, such as establishing policies, training, tools and key performance indicators.
Investment Appraisals
This document discusses various methods used for investment appraisal to assess whether investment projects are worthwhile. It describes payback period, accounting rate of return, internal rate of return, profitability index, and net present value. Net present value discounts future cash flows to account for the time value of money and allows comparison of projects. Internal rate of return identifies the discount rate that results in a net present value of zero. Investment appraisal helps firms evaluate projects and potential returns to determine which investments to make.
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1) Time value of money is an important concept in capital budgeting where the value of cash flows depends on when they occur due to interest rates.
2) To calculate the net present value (NPV) of a project, one discounts each cash inflow to its present value using the appropriate discount factor and sums these values, then subtracts the present value of cash outflows.
3) NPV is the preferred method for evaluating projects as it considers the timing of all cash flows, but payback period can also be considered to account for uncertainty in long-term cash flows.
Capital Expenditure | Finance
Any expenditure which is incurred in acquiring or increasing the value of a fixed asset is termed as capital expenditure. As such, the amount spent on the purchase of land and building, plant and machinery, furniture, etc. is capital expenditure. Copy the link given below and paste it in new browser window to get more information on Capital Expenditure:- www.transtutors.com/homework-help/finance/capital-expenditure.aspx
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The document provides a summary of a presentation on investment appraisal and capital budgeting. It discusses Richard Branson's approach to starting businesses without extensive accounting involvement. It then summarizes the objectives and limitations of management accounting. The document outlines a proposed tea production and export project for Maltras International Ltd, including project costs, financing, financial projections, cash flow statements, and investment appraisal calculations. Based on the discounted cash flow analysis, the project has a positive net present value of Rs. 21,680,818, indicating it should be accepted.
Capital expenditure proposals
A capital expenditure proposal is a formal request to undertake projects to acquire or upgrade physical assets. The proposed projects will be ranked according to criteria like payback period, discounted payback method, net present value, and internal rate of return. There are different types of investment proposals such as mutually exclusive, contingent, and independent proposals as well as replacements. Key principles for capital expenditure proposals include carefully estimating costs, finding profitable opportunities, estimating future revenues and expenses, considering non-monetary factors, screening and selecting projects, and preparing necessary reports.
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This document discusses various capital budgeting techniques used to evaluate investment projects, including:
1. Discounted cash flow methods like net present value (NPV), internal rate of return (IRR), and profitability index (PI).
2. Non-discounted cash flow methods like payback period, discounted payback period, and accounting rate of return (ARR).
It provides formulas, examples, and decision rules for calculating each method and comparing investment opportunities.
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The document discusses methods for evaluating capital investment decisions in healthcare organizations. It introduces the payback period method, which calculates the number of years to recover an initial investment without considering the time value of money. The net present value (NPV) method is presented, which discounts future cash flows to account for the cost of capital and calculates the difference between the initial investment and discounted cash flows. The internal rate of return (IRR) method is also covered, which is the discount rate that makes the NPV equal to zero. Decision rules for accepting or rejecting projects using NPV and IRR are provided.
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The document discusses capital budgeting, which refers to investment decisions organizations make regarding large capital projects or assets. It covers several key aspects of capital budgeting including: the importance of these decisions given factors like large amounts of money involved and long-term impact; various capital budgeting techniques used to evaluate projects like payback period, net present value (NPV), and internal rate of return (IRR); and how to apply these techniques to calculate metrics and determine which projects to accept.
Capital budgeting
Capital budgeting is the process of evaluating potential real investment projects and determining which ones a firm should undertake. It involves estimating project cash flows, evaluating them using discounted cash flow techniques like net present value (NPV), internal rate of return (IRR), and profitability index (PI), and selecting projects that maximize shareholder wealth. These techniques discount cash flows to present values using a discount rate and approve projects whose NPV is positive, IRR exceeds the opportunity cost of capital, or PI is greater than one. Each method has strengths like easy interpretation but also weaknesses like difficulties in calculations or special circumstances requiring adjustments.
Capital budgeting
The slide is about evaluation of investment in projects before starting the project. Useful for Finance Manager, Finance Students, Entrepreneurs and Project Managers
capital investment decision
Financial management involves planning, organizing, directing, and controlling a company's financial resources. Capital investment refers to acquiring long-term assets like plants and machinery. Capital budgeting determines the viability of long-term investments and uses techniques like net present value, internal rate of return, and payback period to evaluate projects. It considers the time value of money, risk, and rates of return to make optimal investment decisions.
Capital budgeting
This document provides an overview of capital budgeting and investment decision making. It defines key terms like capital budgeting, investment decisions, cash flows, net present value, and discounted cash flow techniques. It also summarizes several approaches to evaluating investment projects, including payback period, accounting rate of return, net present value, and internal rate of return. The document emphasizes the importance of considering the time value of money when analyzing projects with cash flows occurring over multiple periods.
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The document discusses various capital budgeting techniques used to evaluate long-term investment projects. It describes traditional methods like payback period and accounting rate of return, as well as discounted cash flow methods like net present value, internal rate of return, and profitability index. These time-adjusted methods account for the time value of money and required rate of return when analyzing projects. The document also discusses factors that introduce risk and uncertainty into capital budgeting decisions.
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1) The document discusses various methods and considerations for capital investment and budgeting decisions, including determining relevant cash flows, accounting for inflation, and different approaches to calculating operating cash flow.
2) It emphasizes that capital budgeting decisions should be based on incremental after-tax cash flows rather than accounting profits and highlights factors like sunk costs, opportunity costs, and side effects.
3) The document provides a detailed example of a capital budgeting analysis for a company considering investing in a new machine and outlines the calculation of cash flows and net present value.
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This document contains the agenda and presentation for a group project on capital budgeting. The group will discuss definitions of capital budgeting, when it is used, importance, techniques like payback period, net present value and internal rate of return. It also contains solutions to 4 case studies on capital budgeting decisions around investments in new machines and product lines.
Capital budgeting
The document discusses capital budgeting, which refers to the process of evaluating long-term investment projects. It describes the various techniques used to evaluate capital budgeting proposals, including non-discounting methods like payback period and accounting rate of return, as well as discounted cash flow methods like net present value, internal rate of return, and profitability index. The stages of the capital budgeting process and sources of financing for capital budgeting decisions are also outlined.
Report advanced investment appraisal
The document discusses various investment appraisal techniques including net present value (NPV), profitability index (PI), capital rationing, effects of inflation and taxation, replacement decisions, and delaying projects. It provides definitions and examples of each technique. For capital rationing situations, it explains how to use the profitability index to rank projects when funds are limited. It also discusses how to account for changing prices and inflation in cash flow forecasts, as well as the timing and amount of tax payments. The document concludes with explanations of how to evaluate replacement decisions using annual equivalent value (AEV) and situations where delaying a project could be advantageous.
Capital budgeting
Capital budgeting involves planning expenditures for long-term assets that provide returns over several years. It is an important process that requires evaluating projects carefully due to their large size, long-term implications, and irreversible nature. Key aspects of capital budgeting include identifying and evaluating investment proposals, determining which provide the highest expected rates of return, and preparing a capital expenditure budget. Various techniques can be used to evaluate projects, including payback period, accounting rate of return, net present value, internal rate of return, and risk-adjusted methods that account for uncertainty in projected cash flows.
Capital budgeting
The document discusses capital budgeting, which refers to the process companies use to evaluate major investments. It defines capital budgeting as evaluating purchases of fixed assets using current funds. The capital budgeting process involves generating projects, evaluating them, selecting projects, and follow up. Methods to evaluate projects include payback period, accounting rate of return, net present value, and profitability index. These methods use calculations involving initial investments, expected cash flows, discount rates, and time value of money to determine which projects will be most profitable.
Sesi 6 cap budgeting
The document discusses various capital budgeting techniques used to evaluate investment projects, including payback period, net present value (NPV), and internal rate of return (IRR). It provides examples of how to calculate NPV and IRR using data for two projects (Projects A and B) under consideration by Bennett Company. While NPV is theoretically superior because it incorporates the time value of money, IRR is more commonly used in practice because managers prefer looking at rates of return. Conflicting recommendations between NPV and IRR can occur when projects have non-standard cash flow patterns.
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The document discusses investment appraisal methods like net present value (NPV) and internal rate of return (IRR). It provides examples to calculate NPV and IRR for a project to determine if it should be accepted. NPV compares the present value of cash inflows to outflows, with a positive NPV meaning the project should be accepted. IRR is the discount rate that results in an NPV of zero. Both are superior to simpler methods like payback period. While NPV is more accurate, IRR is easier for non-financial managers to understand and use to evaluate projects.
Capital budgeting -2
The document discusses various capital budgeting decision criteria for evaluating investment projects, including payback period, discounted payback period, net present value (NPV), profitability index (PI), and internal rate of return (IRR). It provides examples of how to calculate each metric and the decision rules for accepting or rejecting projects based on the criteria. For a sample problem, it calculates the project's IRR as 34.37%, NPV at a 15% discount rate as $510.52, and PI as 1.57 by taking the NPV and dividing it by the initial investment outlay.
Capital budgeting
Companies use capital budgeting tools to evaluate long-term investment projects. The document discusses several tools: net present value (NPV) calculates the present value of cash flows to determine if a project is worth more today; internal rate of return (IRR) finds the discount rate that produces an NPV of zero; modified IRR (MIRR) adjusts for more realistic reinvestment assumptions; profitability index (PI) measures risk-adjusted return; and payback period finds how long until the initial investment is recouped. No single tool is perfect, so analysts typically use a combination for capital budgeting decisions.
Capital budgeting theory
Capital budgeting is a process of evaluating investments and huge expenses in order to obtain the best returns on investment.
An organization is often faced with the challenges of selecting between two projects/investments or the buy vs replace decision. Ideally, an organization would like to invest in all profitable projects but due to the limitation on the availability of capital an organization has to choose between different projects/investments.
What are the objectives of Capital budgeting?
Capital expenditures are huge and have a long-term effect. Therefore, while performing a capital budgeting analysis an organization must keep the following objectives in mind:
1. Selecting profitable projects
An organization comes across various profitable projects frequently. But due to capital restrictions, an organization needs to select the right mix of profitable projects that will increase its shareholders’ wealth.
2. Capital expenditure control
Selecting the most profitable investment is the main objective of capital budgeting. However, controlling capital costs is also an important objective. Forecasting capital expenditure requirements and budgeting for it, and ensuring no investment opportunities are lost is the crux of budgeting.
3. Finding the right sources for funds
Determining the quantum of funds and the sources for procuring them is another important objective of capital budgeting. Finding the balance between the cost of borrowing and returns on investment is an important goal of Capital Budgeting.
The following are the two methods:
A) Traditional Method
1. Pay back period method
2. Improvement of traditional approach
3. Rate of Return Method or Accounting Method
B) Time adjusted method or discount methods
4. Net Present Value method
5. Internal Rate of Return Method
6. Profitability Index Method
6 financial evaluation
Based on the parameters provided, Project X performs better than Project Y in terms of IRR, payback period, profitability index and cost of capital. Project Y performs better in terms of rate of return and BEP. The NPV is equal for both projects at the cost of capital rates provided. Overall, Project X appears to be the better investment option.
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The document discusses ways to reduce spending and lower SG&A costs by up to 20% within 12-18 months. It identifies issues like off-contract spending, disregard of purchase policies, and lack of paperwork and budget control. The solution proposed is Capex.Xpress software, which allows users to track capital and operational expenditures and the entire procurement process from requisitions to invoices in one integrated workflow system. This provides control over spending, reduces costs, and improves productivity, efficiency, and performance management.
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Net present Value, Internal Rate Of Return, Profitability Index, Payback, dis...
This document discusses various capital budgeting techniques used to evaluate investment projects, including:
1. Discounted cash flow methods like net present value (NPV), internal rate of return (IRR), and profitability index (PI).
2. Non-discounted cash flow methods like payback period, discounted payback period, and accounting rate of return (ARR).
It provides formulas, examples, and decision rules for calculating each method and comparing investment opportunities.
Chapter 7: The Investment Decision
The document discusses methods for evaluating capital investment decisions in healthcare organizations. It introduces the payback period method, which calculates the number of years to recover an initial investment without considering the time value of money. The net present value (NPV) method is presented, which discounts future cash flows to account for the cost of capital and calculates the difference between the initial investment and discounted cash flows. The internal rate of return (IRR) method is also covered, which is the discount rate that makes the NPV equal to zero. Decision rules for accepting or rejecting projects using NPV and IRR are provided.
Capital budgeting latest
The document discusses capital budgeting, which refers to investment decisions organizations make regarding large capital projects or assets. It covers several key aspects of capital budgeting including: the importance of these decisions given factors like large amounts of money involved and long-term impact; various capital budgeting techniques used to evaluate projects like payback period, net present value (NPV), and internal rate of return (IRR); and how to apply these techniques to calculate metrics and determine which projects to accept.
Capital budgeting
Capital budgeting is the process of evaluating potential real investment projects and determining which ones a firm should undertake. It involves estimating project cash flows, evaluating them using discounted cash flow techniques like net present value (NPV), internal rate of return (IRR), and profitability index (PI), and selecting projects that maximize shareholder wealth. These techniques discount cash flows to present values using a discount rate and approve projects whose NPV is positive, IRR exceeds the opportunity cost of capital, or PI is greater than one. Each method has strengths like easy interpretation but also weaknesses like difficulties in calculations or special circumstances requiring adjustments.
Capital budgeting
The slide is about evaluation of investment in projects before starting the project. Useful for Finance Manager, Finance Students, Entrepreneurs and Project Managers
capital investment decision
Financial management involves planning, organizing, directing, and controlling a company's financial resources. Capital investment refers to acquiring long-term assets like plants and machinery. Capital budgeting determines the viability of long-term investments and uses techniques like net present value, internal rate of return, and payback period to evaluate projects. It considers the time value of money, risk, and rates of return to make optimal investment decisions.
Capital budgeting
This document provides an overview of capital budgeting and investment decision making. It defines key terms like capital budgeting, investment decisions, cash flows, net present value, and discounted cash flow techniques. It also summarizes several approaches to evaluating investment projects, including payback period, accounting rate of return, net present value, and internal rate of return. The document emphasizes the importance of considering the time value of money when analyzing projects with cash flows occurring over multiple periods.
Capital Budgeting Er. S Sood
The document discusses various capital budgeting techniques used to evaluate long-term investment projects. It describes traditional methods like payback period and accounting rate of return, as well as discounted cash flow methods like net present value, internal rate of return, and profitability index. These time-adjusted methods account for the time value of money and required rate of return when analyzing projects. The document also discusses factors that introduce risk and uncertainty into capital budgeting decisions.
chap006 Making Capital Investment Decisions
1) The document discusses various methods and considerations for capital investment and budgeting decisions, including determining relevant cash flows, accounting for inflation, and different approaches to calculating operating cash flow.
2) It emphasizes that capital budgeting decisions should be based on incremental after-tax cash flows rather than accounting profits and highlights factors like sunk costs, opportunity costs, and side effects.
3) The document provides a detailed example of a capital budgeting analysis for a company considering investing in a new machine and outlines the calculation of cash flows and net present value.
4) It addresses special considerations like how to incorporate inflation, evaluate projects of unequal lengths, and use
Capital Budgeting - Discounted Cash Flow Analysis - group syndicate 3
This document contains the agenda and presentation for a group project on capital budgeting. The group will discuss definitions of capital budgeting, when it is used, importance, techniques like payback period, net present value and internal rate of return. It also contains solutions to 4 case studies on capital budgeting decisions around investments in new machines and product lines.
Capital budgeting
The document discusses capital budgeting, which refers to the process of evaluating long-term investment projects. It describes the various techniques used to evaluate capital budgeting proposals, including non-discounting methods like payback period and accounting rate of return, as well as discounted cash flow methods like net present value, internal rate of return, and profitability index. The stages of the capital budgeting process and sources of financing for capital budgeting decisions are also outlined.
Report advanced investment appraisal
The document discusses various investment appraisal techniques including net present value (NPV), profitability index (PI), capital rationing, effects of inflation and taxation, replacement decisions, and delaying projects. It provides definitions and examples of each technique. For capital rationing situations, it explains how to use the profitability index to rank projects when funds are limited. It also discusses how to account for changing prices and inflation in cash flow forecasts, as well as the timing and amount of tax payments. The document concludes with explanations of how to evaluate replacement decisions using annual equivalent value (AEV) and situations where delaying a project could be advantageous.
Capital budgeting
Capital budgeting involves planning expenditures for long-term assets that provide returns over several years. It is an important process that requires evaluating projects carefully due to their large size, long-term implications, and irreversible nature. Key aspects of capital budgeting include identifying and evaluating investment proposals, determining which provide the highest expected rates of return, and preparing a capital expenditure budget. Various techniques can be used to evaluate projects, including payback period, accounting rate of return, net present value, internal rate of return, and risk-adjusted methods that account for uncertainty in projected cash flows.
Capital budgeting
The document discusses capital budgeting, which refers to the process companies use to evaluate major investments. It defines capital budgeting as evaluating purchases of fixed assets using current funds. The capital budgeting process involves generating projects, evaluating them, selecting projects, and follow up. Methods to evaluate projects include payback period, accounting rate of return, net present value, and profitability index. These methods use calculations involving initial investments, expected cash flows, discount rates, and time value of money to determine which projects will be most profitable.
Sesi 6 cap budgeting
The document discusses various capital budgeting techniques used to evaluate investment projects, including payback period, net present value (NPV), and internal rate of return (IRR). It provides examples of how to calculate NPV and IRR using data for two projects (Projects A and B) under consideration by Bennett Company. While NPV is theoretically superior because it incorporates the time value of money, IRR is more commonly used in practice because managers prefer looking at rates of return. Conflicting recommendations between NPV and IRR can occur when projects have non-standard cash flow patterns.
Strategic Financial Management- Investment Appraisal NPV IRR
The document discusses investment appraisal methods like net present value (NPV) and internal rate of return (IRR). It provides examples to calculate NPV and IRR for a project to determine if it should be accepted. NPV compares the present value of cash inflows to outflows, with a positive NPV meaning the project should be accepted. IRR is the discount rate that results in an NPV of zero. Both are superior to simpler methods like payback period. While NPV is more accurate, IRR is easier for non-financial managers to understand and use to evaluate projects.
Capital budgeting -2
The document discusses various capital budgeting decision criteria for evaluating investment projects, including payback period, discounted payback period, net present value (NPV), profitability index (PI), and internal rate of return (IRR). It provides examples of how to calculate each metric and the decision rules for accepting or rejecting projects based on the criteria. For a sample problem, it calculates the project's IRR as 34.37%, NPV at a 15% discount rate as $510.52, and PI as 1.57 by taking the NPV and dividing it by the initial investment outlay.
Capital budgeting
Companies use capital budgeting tools to evaluate long-term investment projects. The document discusses several tools: net present value (NPV) calculates the present value of cash flows to determine if a project is worth more today; internal rate of return (IRR) finds the discount rate that produces an NPV of zero; modified IRR (MIRR) adjusts for more realistic reinvestment assumptions; profitability index (PI) measures risk-adjusted return; and payback period finds how long until the initial investment is recouped. No single tool is perfect, so analysts typically use a combination for capital budgeting decisions.
Capital budgeting theory
Capital budgeting is a process of evaluating investments and huge expenses in order to obtain the best returns on investment.
An organization is often faced with the challenges of selecting between two projects/investments or the buy vs replace decision. Ideally, an organization would like to invest in all profitable projects but due to the limitation on the availability of capital an organization has to choose between different projects/investments.
What are the objectives of Capital budgeting?
Capital expenditures are huge and have a long-term effect. Therefore, while performing a capital budgeting analysis an organization must keep the following objectives in mind:
1. Selecting profitable projects
An organization comes across various profitable projects frequently. But due to capital restrictions, an organization needs to select the right mix of profitable projects that will increase its shareholders’ wealth.
2. Capital expenditure control
Selecting the most profitable investment is the main objective of capital budgeting. However, controlling capital costs is also an important objective. Forecasting capital expenditure requirements and budgeting for it, and ensuring no investment opportunities are lost is the crux of budgeting.
3. Finding the right sources for funds
Determining the quantum of funds and the sources for procuring them is another important objective of capital budgeting. Finding the balance between the cost of borrowing and returns on investment is an important goal of Capital Budgeting.
The following are the two methods:
A) Traditional Method
1. Pay back period method
2. Improvement of traditional approach
3. Rate of Return Method or Accounting Method
B) Time adjusted method or discount methods
4. Net Present Value method
5. Internal Rate of Return Method
6. Profitability Index Method
6 financial evaluation
Based on the parameters provided, Project X performs better than Project Y in terms of IRR, payback period, profitability index and cost of capital. Project Y performs better in terms of rate of return and BEP. The NPV is equal for both projects at the cost of capital rates provided. Overall, Project X appears to be the better investment option.
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5.capital and revenue
Capital and revenue expenditures and receipts must be distinguished to determine which items appear in which financial statements. Capital items appear on the balance sheet, while revenue items appear on the profit and loss account. This distinction is also important for determining net profit, which equals revenue receipts minus revenue expenses. Capital receipts include contributions of capital and loans, while revenue receipts are generated from a firm's regular activities like sales. Capital expenditures acquire or improve long-term assets, increasing earning capacity, while revenue expenditures maintain assets and earnings over a single accounting period.
Capital Budgeting
Capital budgeting refers to the process of evaluating investment projects and determining whether they should be accepted or rejected. There are traditional and discounted cash flow methods for evaluating projects. Traditional methods include payback period and accounting rate of return, which do not consider the time value of money. Discounted cash flow methods like net present value (NPV) and internal rate of return (IRR) discount future cash flows to determine if a project will provide sufficient returns. The capital budgeting process involves project generation, evaluation using techniques like NPV or IRR, and selection of projects that meet acceptance criteria.
Tools and Techniques of Capital Expenditure Control
This document discusses tools and techniques for controlling capital expenditures. It defines capital expenditures as funds used to obtain physical assets used for over a year to expand a business. The four main tools discussed are: 1) performance indexes like schedule and cost performance indexes to measure efficiency, 2) technical performance measurements to monitor project requirements, 3) post-completion audits to evaluate final costs/benefits, and 4) earned value management which integrates measurements of scope, time and costs to provide accurate forecasts of project performance problems. The objectives of capital expenditure control are also outlined.
Capital and revenue expenditure and income in accounting
Capital and revenue transactions can be divided into capital expenditures, revenue expenditures, capital receipts, and revenue receipts. Capital expenditures are non-recurring and increase business efficiency, such as purchasing fixed assets. Revenue expenditures are recurring day-to-day costs that support business operations, like administrative costs. Capital receipts come from non-recurring sources like asset sales, while revenue receipts are recurring income from normal business activities like sales. Some expenditures provide benefits over multiple periods and are considered deferred revenue expenditures, including heavy advertising costs.
Capital & revenue
1. Capital expenditure is incurred to acquire or improve assets and bring them into working condition, while revenue expenditure maintains assets.
2. Deferred revenue expenditure provides benefits over multiple years, like research costs.
3. Expenses must be classified correctly as capital or revenue for adhering to accounting principles and showing accurate financial results.
Income & expenditure ppt
A budget is a financial plan that shows expected income and expenditure over a period of time. It is important to budget to ensure money is available to cover costs, reduce impulse buying, avoid debt, and save for emergencies. A budget accounts for regular income like wages, irregular income like bonuses, and non-cash benefits. It also accounts for fixed, irregular, and discretionary expenses. By tracking income, expenses, and the difference between the two, a budget identifies surpluses or deficits at the end of each period.
Capital budgeting
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Difference between capital expenditure and revenue expenditure
Revenue expenditure provides temporary benefits within the accounting year and does not result in acquisition of an asset. It is recurring and reduces profit. Capital expenditure provides long-term benefits over several years through acquisition or improvement of an asset. It is non-recurring and does not reduce profit. The document uses examples to distinguish between capital and revenue expenditures such as wages, transportation costs, repairs, and improvements to assets.
Infrastructure - Ready for a long ride! Buy Ashoka Buildcon and Sadbhav Eng
Prabhudas Lilladher Pvt. Ltd. produces research reports on companies it does business with, so it may have a conflict of interest. Investors should consider this report as just one factor when making investment decisions. The document provides a positive outlook for the Indian road sector due to increased government focus, higher project awards, and an improving tender pipeline and traffic growth. It recommends two companies, Ashoka Buildcon and Sadbhav Engineering, which are well positioned to benefit from growth in the sector given their operating portfolios, balance sheets, and execution capabilities.
İdarəetmə uçotunda xərclərin təsnifatı by PhD Togrul Polukhov
İdarəetmə uçotunda xərclərin təsnifatı
İqtisad üzrə fəlsəfə doktoru Poluxov Toğrul tərəfindən hazırlanmış bu prezentasiya materialı "İdarəetmə uçotunda xerclerin tesnifatı" mövzusuna həsr edilmişdir. Prezentasiya materialında xərclərin təsnifat konsepsiları tam verilmiş və praktiki məsələlərlə şərh edilmişdir. Mövzu aşağıdakı məsələlərə aydınlıq gətirir:
Xərclər və məsrəflər, Xərclərin təsnifat konsepsiyaları,sabit və dəyişən xərclər, birbaşa və dolayı xərclər, yüksək və aşağı hədd metodu, digər təsnifat konspesiyaları üzrə xərclərin növləri.
Müəlliflik huquqları qorunur! (http://polukhov.webs.com/)
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O documento discute a diferença entre CAPEX e OPEX. CAPEX refere-se a investimentos em bens de capital que agregam valor à empresa, enquanto OPEX refere-se aos custos de manutenção desses bens. O documento também diferencia entre situações econômicas e financeiras, explicando que a econômica está relacionada aos custos e receitas de produção, enquanto a financeira está relacionada à liquidez e gerenciamento de caixa.
Better Invoicing
The document outlines changes being made to simplify and increase transparency in an insurance company's billing and documentation processes. Key changes include replacing statements of account with simpler invoices, removing unnecessary fields from data templates, shortening the direct debit notice period from 10 to 5 days, automatically offsetting refunds against future payments, including more detailed premium breakdowns and adjustments, and allowing past members to be added for premium adjustments. The changes aim to address issues like confusing billing, lengthy payment periods, and lack of transparency in premium calculations.
Financial Statement- CLASSIFICATION OF CAPITAL AND REVENUE EXPENDITURE AND RE...
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Reducing Operating Expense with EMC ViPR Controller and ViPR SRM
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Furthermore, the ability to integrate with orchestration applications and cloud stacks and to leverage officially unsupported storage via a third-party block provider means that ViPR Controller can benefit your organization across your service portfolio. When coupled with the additional OPEX savings found through reductions in change control and improved site management, ViPR Controller and ViPR SRM can improve your organization’s bottom line, providing millions of dollars in OPEX savings.
6.1 Sales Promotion
This document discusses various types of sales promotion techniques that can be used to stimulate sales and customer demand. It describes common promotional methods like displays, premiums, rebates, samples, sweepstakes, contests, loyalty programs, point-of-purchase promotions, and special events. The document also provides guidance on developing an effective promotional strategy, including determining objectives, selecting products to feature, developing a promotional mix and budget, and evaluating outcomes.
Boots hair care sales promotion
Boots is a major UK retailer that sells health and beauty products. It wants to increase market share in the hair care segment. Three promotional strategies are considered: buy 3 products for the price of 2 ("3 for 2"), receive a gift with purchase (GWP), or receive a 50p coupon. Quantitative analysis shows "3 for 2" generates the highest net profit of £478.80 for premium brands and £150 for mass market brands, making it the best strategy.
A gentle introduction to the plannig and budgetting cycle cm lppt
The aim of this presentation is to help executives and project managers to better understand some of the basic principles of planning and budgeting.
Capital and revenue_income_and_expenditure
Capital expenditure is spending used to acquire or improve fixed assets that are used by a business to generate income over multiple years. It includes purchasing land, buildings, machinery, vehicles, patents and other long-term assets. Capital expenditure provides long-term benefits to a business and increases the value of its assets. Revenue expenditure is recurring spending used to maintain business operations and generate revenue, such as wages, rent, utilities and repairs. It does not create future benefits or increase asset values. Deferred expenditure is either revenue or capital spending whose benefits last multiple years, with the cost amortized over that time.
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İdarəetmə uçotunda xərclərin təsnifatı by PhD Togrul Polukhov
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The document provides financial information for Aditya Mills Limited including the balance sheet and profit and loss statement. It then lists various ratios to calculate for Aditya Mills like current ratio, acid test ratio, stock turnover, debtors turnover, gross profit ratio, net profit ratio, operating ratio, earnings per share, and rate of return on equity capital. It also provides information on how certain transactions would impact the current ratio.
Assignment 5
1) The document contains 4 questions providing financial information for various companies, asking to prepare balance sheets and analyze financial ratios.
2) Question 4 asks which company Mr. Desai should prefer to supply goods to based on their financial information, considering factors like stock, debtors, cash, creditors.
3) Question 5 provides trading and profit & loss account and balance sheet for a company and asks to draft revised statements achieving certain objectives by changing ratios and amounts.
4) Question 6 gives financial ratios and asks to prepare a balance sheet for a company.
5) Question 7 asks to interpret accounting ratios based on summarized balance sheets and profit & loss statements for 2 years.
6) Question 8 provides more
FUND FLOW STATEMENT MATERIALS PPT.pptx
The document is a fund flow statement for B Ltd for the year ending 31 December 2019.
1) Sources of funds included fund flow from operations of Rs. 2,26,500, sale of plant and machinery for Rs. 44,000, and a decrease in working capital of Rs. 32,500.
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This document discusses various aspects of inventory and accounts receivable management. It defines key terms like economic ordering quantity (EOQ), reorder level, inventory turnover ratio, ABC analysis, and bill of materials. It provides formulas to calculate EOQ and discusses how to determine optimal inventory levels. Examples are given to illustrate calculation of EOQ, analysis of extending credit terms, and classification of inventories using ABC analysis. The document also briefly explains perpetual inventory systems and various committees that have made recommendations around working capital management in India.
Your answer is incorrect. Try again.Prepare a comparati.docx
Your answer is incorrect. Try again.
Prepare a comparative balance sheet of Gilmour Company showing the dollar change and the percent change for each item. (Round percentages to 2 decimal places, e.g. 2.25%. If $ or % change are in decrease, enter amounts or percentages using either a negative sign preceding the number e.g. -45, -2.25% or parentheses e.g. (45), (2.25)%.)
GILMOUR COMPANY
Comparative Balance Sheet
December 31, 2013 and 2012
December 31
Increase or (Decrease)
Assets
2013
2012
$ Change
% Change
Cash
$ 180,000
$ 275,000
$
%
$-95,000
-34.55%
Accounts receivable (net)
219,500
155,300
64,200
41.34%
Short-term investments
269,300
149,600
119,700
80.01%
Inventories
1,059,600
979,300
80,300
8.20%
Prepaid expenses
24,750
24,750
0
0.00%
Fixed assets
2,585,200
1,949,400
635,800
32.62%
Accumulated depreciation
( 1,000,500
)
( 750,100
)
-250,400
33.38%
Total
$ 3,337,850
$ 2,783,250
$
%
554,600
19.93%
Liabilities and Stockholders’ Equity
Accounts payable
$ 50,020
$ 74,100
$
%
-24,080
-32.50%
Accrued expenses
170,400
199,400
-29,000
-14.54%
Bonds payable
450,500
189,600
260,900
137.61%
Capital stock
2,100,000
1,769,300
330,700
18.69%
Retained earnings
566,930
550,850
16,080
2.92%
Total
$ 3,337,850
$ 2,783,250
$
%
554,600
19.93%
Your answer is partially correct. Try again.
Answer each of the questions in the following unrelated situations.
(a) The current ratio of a company is 5:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to $492,400, what is the amount of current liabilities?
Current Liabilities
$
(b) A company had an average inventory last year of $209,000 and its inventory turnover was 5. If sales volume and unit cost remain the same this year as last and inventory turnover is 9 this year, what will average inventory have to be during the current year? (Round answer to 0 decimal places, e.g. 125.)
Average Inventory
$
(c) A company has current assets of $88,790 (of which $37,160 is inventory and prepaid items) and current liabilities of $37,160. What is the current ratio? What is the acid-test ratio? If the company borrows $13,870 cash from a bank on a 120-day loan, what will its current ratio be? What will the acid-test ratio be? (Round answers to 2 decimal places, e.g. 2.50.)
Current Ratio
:1
Acid Test Ratio
:1
New Current Ratio
:1
New Acid Test Ratio
:1
(d) A company has current assets of $605,100 and current liabilities of $239,000. The board of directors declares a cash dividend of $191,200. What is the current ratio after the declaration but before payment? What is the current ratio after the payment of the dividend? (Round answers to 2 decimal places, e.g. 2.50.)
Current ratio after the declaration but before payment
:1
Current ratio after the p.
Financial analysis of_sbi
This document provides financial ratios for State Bank of India for the years ending March 2008, March 2009, and March 2010. Some key ratios that declined over this period include the operating margin, which fell from 19.5% to 16.96% due to higher operating expenses, and the adjusted return on net worth, which declined sharply from 15.74% to -57.84% as profit growth did not keep pace with the increase in shareholders' funds. Liquidity and leverage ratios such as the current ratio and quick ratio improved slightly, while the total debt to equity ratio remained high, reflecting the bank's reliance on external borrowing.
sample paper term 2 (Accountancy Answer).pdf
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The document contains financial information and analysis for Elite S.A. de C.V. for 2019 and 2020. It shows that the company had significant increases in inventories, accounts receivable, and bank debt from 2019 to 2020. Profitability ratios show high profitability and returns on assets and equity. Liquidity and accounts receivable turnover ratios also indicate good liquidity and collection success. While it is not possible to fully evaluate the company, the financial ratios presented show generally positive financial performance.
Common Size Statement of Assets & Liabilities
Common Size Balance Sheet
A common size balance sheet shows the percentage in relation to each item of assets to total assets and each item of liabilities to total liabilities and capital.
A comparative common size balance sheet for different periods helps to understand the trends and reasons for changes in different items.
ACC205 Discussion QuestionsAccounting Equation As you hav.docx
ACC205 Discussion Questions:
Accounting Equation
As you have learned in this week’s readings the Accounting Equation is Assets = Liabilities + Owners’ Equity. Is the accounting equation true in all instances? Provide sample transactions from your own experiences to demonstrate the validity of the Accounting Equation.
Accounts
What does the term account mean? What are the different classifications of accounts? How do the rules for debits and credits impact accounts? Please provide an example of how debits and credits impact accounts.
Accounting Cycle
Financial statements are a product of the accounting cycle. Think about two different companies: a manufacturing company, and a retail company. Why would different companies have different accounting cycles? Would you expect the steps of the accounting cycle to be the same for each company? Why or why not?
Bank Reconciliation
What is the purpose of a bank reconciliation? What are the reasons for differences between the cash reported in the accounting records and the cash balance in the bank statements?
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Depreciation
A variety of depreciation methods are used to allocate the cost of an asset to all of the accounting periods benefited by the use of the asset. Your client has just purchased a piece of equipment for $100,000. Explain the concept of depreciation. Which of the following depreciation methods would you recommend: straight-line depreciation, double declining balance method, or an alternative method?
Ratios
Ratios provide the users of financial statements with a great deal of information about the entity. Do ratios tell the whole story? How could liquidity ratios be used by investors to determine whether or not to invest in a company?
Profit Margin
Year Ending December 2012
Year Ending December 2011
Year Ending December 2010
Revenues
40,000
35,000
33,000
Operating Expenses
Salaries
15,000
10,000
9,000
Maintenance and Repairs
6,000
9,000
10,000
Rental Expense
2,500
2,500
2,500
Depreciation
2,000
2,000
2,000
Fuel
4,000
3,500
2,500
Total Operating Expenses
29,500
27,000
26,000
Operating Income
10,500
8,000
7,000
Sales and Administrative Expenses
6,000
4,000
3,000
Interest Expense
2,500
2,000
1,000
Net Income
2,000
2,000
3,000
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Edi.
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【业务选择办理准则】
一、工作未确定，回国需先给父母、亲戚朋友看下文凭的情况，办理一份就读学校的毕业证【微信bwp0011】文凭即可
二、回国进私企、外企、自己做生意的情况，这些单位是不查询毕业证真伪的，而且国内没有渠道去查询国外文凭的真假，也不需要提供真实教育部认证。鉴于此，办理一份毕业证【微信bwp0011】即可
三、进国企，银行，事业单位，考公务员等等，这些单位是必需要提供真实教育部认证的，办理教育部认证所需资料众多且烦琐，所有材料您都必须提供原件，我们凭借丰富的经验，快捷的绿色通道帮您快速整合材料，让您少走弯路。
留信网认证的作用:
1:该专业认证可证明留学生真实身份
2:同时对留学生所学专业登记给予评定
3:国家专业人才认证中心颁发入库证书
4:这个认证书并且可以归档倒地方
5:凡事获得留信网入网的信息将会逐步更新到个人身份内，将在公安局网内查询个人身份证信息后，同步读取人才网入库信息
6:个人职称评审加20分
7:个人信誉贷款加10分
8:在国家人才网主办的国家网络招聘大会中纳入资料，供国家高端企业选择人才
【关于价格问题（保证一手价格）】
我们所定的价格是非常合理的，而且我们现在做得单子大多数都是代理和回头客户介绍的所以一般现在有新的单子 我给客户的都是第一手的代理价格，因为我想坦诚对待大家 不想跟大家在价格方面浪费时间
对于老客户或者被老客户介绍过来的朋友，我们都会适当给一些优惠。
How to Invest in Cryptocurrency for Beginners: A Complete Guide
Cryptocurrency is digital money that operates independently of a central authority, utilizing cryptography for security. Unlike traditional currencies issued by governments (fiat currencies), cryptocurrencies are decentralized and typically operate on a technology called blockchain. Each cryptocurrency transaction is recorded on a public ledger, ensuring transparency and security.
Cryptocurrencies can be used for various purposes, including online purchases, investment opportunities, and as a means of transferring value globally without the need for intermediaries like banks.
Chapter 25: Economic Growth Summary from Samuelson and Nordhaus
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一比一原版宾夕法尼亚大学毕业证(UPenn毕业证书)学历如何办理
挂科购买【微信号:176555708】【挂科购买(UPenn毕业证书)】【微信号:176555708】《成绩单、外壳、offer、真实留信官方学历认证（永久存档/真实可查）》采用学校原版纸张、特殊工艺完全按照原版一比一制作（包括：隐形水印，阴影底纹，钢印LOGO烫金烫银，LOGO烫金烫银复合重叠，文字图案浮雕，激光镭射，紫外荧光，温感，复印防伪）行业标杆！精益求精，诚心合作，真诚制作！多年品质 ,按需精细制作，24小时接单,全套进口原装设备，十五年致力于帮助留学生解决难题，业务范围有加拿大、英国、澳洲、韩国、美国、新加坡，新西兰等学历材料，包您满意。
【我们承诺采用的是学校原版纸张（纸质、底色、纹路）我们拥有全套进口原装设备，特殊工艺都是采用不同机器制作，仿真度基本可以达到100%，所有工艺效果都可提前给客户展示，不满意可以根据客户要求进行调整，直到满意为止！】
【业务选择办理准则】
一、工作未确定，回国需先给父母、亲戚朋友看下文凭的情况，办理一份就读学校的毕业证【微信号:176555708】文凭即可
二、回国进私企、外企、自己做生意的情况，这些单位是不查询毕业证真伪的，而且国内没有渠道去查询国外文凭的真假，也不需要提供真实教育部认证。鉴于此，办理一份毕业证【微信号:176555708】即可
三、进国企，银行，事业单位，考公务员等等，这些单位是必需要提供真实教育部认证的，办理教育部认证所需资料众多且烦琐，所有材料您都必须提供原件，我们凭借丰富的经验，快捷的绿色通道帮您快速整合材料，让您少走弯路。
留信网认证的作用:
1:该专业认证可证明留学生真实身份
2:同时对留学生所学专业登记给予评定
3:国家专业人才认证中心颁发入库证书
4:这个认证书并且可以归档倒地方
5:凡事获得留信网入网的信息将会逐步更新到个人身份内，将在公安局网内查询个人身份证信息后，同步读取人才网入库信息
6:个人职称评审加20分
7:个人信誉贷款加10分
8:在国家人才网主办的国家网络招聘大会中纳入资料，供国家高端企业选择人才
留信网服务项目：
1、留学生专业人才库服务（留信分析）
2、国（境）学习人员提供就业推荐信服务
3、留学人员区块链存储服务
【关于价格问题（保证一手价格）】
我们所定的价格是非常合理的，而且我们现在做得单子大多数都是代理和回头客户介绍的所以一般现在有新的单子 我给客户的都是第一手的代理价格，因为我想坦诚对待大家 不想跟大家在价格方面浪费时间
对于老客户或者被老客户介绍过来的朋友，我们都会适当给一些优惠。
选择实体注册公司办理，更放心，更安全！我们的承诺：客户在留信官方认证查询网站查询到认证通过结果后付款，不成功不收费！
The state of welfare Resolution Foundation Event
How has Britain’s safety net changed since 2010 and what comes next?
Monthly Market Risk Update: June 2024 [SlideShare]
Markets rallied in May, with all three major U.S. equity indices up for the month, said Sam Millette, director of fixed income, in his latest Market Risk Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
Economic Risk Factor Update: June 2024 [SlideShare]
May’s reports showed signs of continued economic growth, said Sam Millette, director, fixed income, in his latest Economic Risk Factor Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
Tdasx: Interpreting the 2024 Cryptocurrency Market Funding Trends and Technol...
Tdasx: Interpreting the 2024 Cryptocurrency Market Funding Trends and Technological Developments
Ending stagnation: How to boost prosperity across Scotland
A toxic combination of 15 years of low growth, and four decades of high inequality, has left Britain poorer and falling behind its peers. Productivity growth is weak and public investment is low, while wages today are no higher than they were before the financial crisis. Britain needs a new economic strategy to lift itself out of stagnation.
Scotland is in many ways a microcosm of this challenge. It has become a hub for creative industries, is home to several world-class universities and a thriving community of businesses – strengths that need to be harness and leveraged. But it also has high levels of deprivation, with homelessness reaching a record high and nearly half a million people living in very deep poverty last year. Scotland won’t be truly thriving unless it finds ways to ensure that all its inhabitants benefit from growth and investment. This is the central challenge facing policy makers both in Holyrood and Westminster.
What should a new national economic strategy for Scotland include? What would the pursuit of stronger economic growth mean for local, national and UK-wide policy makers? How will economic change affect the jobs we do, the places we live and the businesses we work for? And what are the prospects for cities like Glasgow, and nations like Scotland, in rising to these challenges?
How to Identify the Best Crypto to Buy Now in 2024.pdf
To identify the best crypto to buy in 2024, analyze market trends, assess the project's fundamentals, review the development team and community, monitor adoption rates, and evaluate risk tolerance. Stay updated with news, regulatory changes, and expert opinions to make informed decisions.
How Poonawalla Fincorp and IndusInd Bank’s Co-Branded RuPay Credit Card Cater...
The eLITE RuPay Platinum Credit Card, a strategic collaboration between Poonawalla Fincorp and IndusInd Bank, represents a significant advancement in India's digital financial landscape. Spearheaded by Abhay Bhutada, MD of Poonawalla Fincorp, the card leverages deep customer insights to offer tailored features such as no joining fees, movie ticket offers, and rewards on UPI transactions. IndusInd Bank's solid banking infrastructure and digital integration expertise ensure seamless service delivery in today's fast-paced digital economy. With a focus on meeting the growing demand for digital financial services, the card aims to cater to tech-savvy consumers and differentiate itself through unique features and superior customer service, ultimately poised to make a substantial impact in India's digital financial services space.
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Being a Paper Presented at the Nigerian Maritime Administration and Safety Agency (NIMASA) Budget Office Staff at Sojourner Hotel, GRA, Ikeja Lagos on Saturday 8th June, 2024.
Dr. Alyce Su Cover Story - China's Investment Leader
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
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Capital expenditure
- 1. Capital Expenditure A consumer company’s Case Study
- 2. Introduction to Case 1. Bank Manager 2. Looking for New Business Opportunities 3. New Office – Human and Intellectual Capital 4. Successfully set a Meeting with MD of HICL
- 3. 5. Six years Old Business, going through rapid expansion, with 95 employees, Growth Meeting Outcomes 4. Needs Medium Term Financing of 1.2 Million 6. From 3 different location to the new One
- 4. Ratio Analysis HUMAN & INTELLECTUAL CAPITAL LIMITED Ratios and Other Information As at May 31 Year 20X1 Year 20X2 Year 20X2 (4 months to 30th Sep) 20X3 (12 months to 30 May) Forecast Actual Forecast Liquidity Current ratio 0.83:1 0.84:1 Acid (Quick) test ratio 0.81:1 0.83:1 0.51:1 0.44:1 Efficiency Credit given (days) 89 81 52 38 Credit taken (days) 83 90 70 69 Profitability Gross profit margin (%) 28 32.9 35.7 34.3 36 Net profit margin (%) 1.3 3.8 9.7 5.6 6.3 Financial Structure Gearing (%) (To compute the ratio) 11.8 2.0 Interest/finance charges cover (times) 4.4 4 7.3 3.6 5.2 Net working assets to sales (%) 3.2 6.1 Retained profit to sales (%) 1.1 2.1
- 5. Balance Sheet’s Analysis Trend Analysis Total Liabilities & SHE Shareholders' funds Distributable reserves Total Longterm Liabilities Long term financing Total Currrent Liabilities Current Tax LT Debt current portion Bank overdraft Total Assets Total Fixed Assets Total Current Assets Stock Debtors Cash Trend Analysis Revaluation Reserve 523,369 in Shareholder Fund COMMON SIZE ANALYSIS 20X2 Shareholders' Distributable reserves Long term financing Term liabilities Hire Purchase over 12 months 0.00% 200.00% 400.00% 600.00% 800.00%1000.00% Creditors Hire Purchase Bank overdraft LT Debt current portion Hire Purchase over 12 months Term liabilities Current Tax Long term financing Revaluation reserve funds Creditors Shareholders' Bank overdraft Hire Purchase Current Tax LT Debt current portion Distributable reserves funds 20X1
- 6. Balance Sheet’s Analysis TOTAL ASSETS – COMMON SIZE Cash Debtors Machinery & Vehicles Freehold land & buildings Plan, Stock ANALYSIS Cash Debtors Stock Freehold land & buildings Plan, Machinery & Vehicles 20X2 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Total Assets – Comparative Cash Debtors Stock Freehold land & buildings Plan, Machinery & Vehicles Common Size Analysis Vertical Analysis 20x1 Vertical Analysis 20x2 20X1
- 7. Balance Sheet’s Analysis Common size Analysis - Total Liabilities Comparative Shareholders' funds Distributable reserves Revaluation reserve Long term financing Hire Purchase over 12 months Term liabilities Current Tax LT Debt current portion Bank overdraft Hire Purchase Creditors 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% Common size Analysis 20x2 Common size Analysis 20x1
- 8. Income Statement HUMAN & INTELLECTUAL CAPITAL LTD Profit & Loss Account Summary 12 months to May 31 Year 20X1 Year 20X2 4 months to 30th Sep Year 20X2 4 months to 30th Sep 20X2 20X3 (12 months to 30 May) Adjusted Calculation Forecast Actual Forecast Sales 2,685,374 5,234,983 2,433,000 2,111,842 7,398,000 Profit after tax 34,549 198,829 235,000 119,136 466,000 236,244 Interest (Finance charge) 10,097 65,193 37,266 45,304 111,700 135,795 Depreciation 38,429 45,267 16,800 16,800 54,000 Directors' remuneration 47,298 63,663 20,000 20,000 85,000 Tax @ 30% Assume 14,784 98,932 EBITDA 97,859 408,221 289,066 181,240 631,700 EBIT 59,430 362,954 272,266 164,440 577,700 Expected Interest 260,795 Interest Coverage with EBIT 1.3917 Int Cov with EBITDA 1.5653
- 9. Ratio Analysis 0.8420x2 Return on Equity Current Ratio 0.8320x1 Less than 1 FINANCING OF CURRENT LIABILITIES Short term Assets 7.82%20x2 3.12%20x1 Less than 10% assumed profit rate Long Term Assets Debt to Equity 11.820x1 Due Revaluation of Building that is still 2.020x2 unrealised
- 10. Agreement in Principles Proposed Loan Calculations 1. $1.25 Million Loan Principle 2. At 10% Profit Margin, Total Payable in 5 years $ 1.875 Million 3. First Year debt repayment $ 115,871 Interest $ 318,706 Installment 4. Adjusted Expected Interest payment for 20x3 $ 260,795 Adjusted Exp + New Facility
- 11. Agreement in Principles Interest Coverage Ratio for 20X3 with New Loan Interest 1. 362,954 EBIT 20X3 & 408,221 EBITD 20X3 2. 362,954/260,795 IC 3. IC = 1.39 or 1.56 i.e < 2
- 12. Agreement in Principles “YES”, subject to certain conditions Past 3 Years Audited Accounts 5 year Projected Mgmt Accounts 130% Collateral/Charge
- 13. Other Facilities Bai Inah Cash Line (OD) Financing - i Customer applies financing from the bank 1. Bank sells their asset at a selling price (financing amount plus profit margin) on deferred term. Customer (1st contract) Bank (2nd contract) Asset (owned by the Bank) 2. When ownership of the asset transferred to customer ,simultaneously the asset is sold back to the Bank at a price equivalent to financing amount and the Bank pays on cash basis to customer as principal limit of Cash Line, made available in customer’s Wadiah Current Account Customer pays profit for utilized amount on monthly basis. Profit on unutilized portion is rebated
- 14. Other Facilities Bai Al Dayn Working Capital Financing i (BWCF) Customer Seller/ Supplier Bank 1. Sells on credit term Buyer 2. Presents the debt (invoices) and bank purchases the debt arising from the sale transaction and pays the Bank on maturity 3. Settles the purchase price on or before maturity date