Financial Valuations

(Liquidity analysis) The Mitchem Marble Company has a target current ratio of 2.1 but has experienced some difficulties financing its expanding sales in the past few months. At present, the firm has a current ratio of 2.7 and current assets of $2.15 million. If Mitchem expands its receivables and inventories using its short-term line of credit, how much additional short-term funding can it borrow before its current ratio standard is reached? ... The additional amount of receivables and inventories (short-term debt) is $ = |million. (Round to two decimal places.)

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(Evaluating liquidity) The Allen Marble Company has a target current ratio of 2.0 but has experienced some difficulties financing its expanding sales in the past few months. At present, the firm has current assets of $2.5 million and a current ratio of 2.5. If Allen expands its receivables and inventories using its short-term line of credit, how much additional short-term funding can it borrow before its current ratio standard is reached? The addition to current assets is $ (Round to the nearest dollar.)

HouseholdCo, a large household products firm, recently reported $6.2 billion in accrued and other liabilities and $49.0 billion in revenues, such that accrued and other liabilities equaled 12.6 percent of revenues. Using data from the annual report's footnote 4 provided below, discuss why a forecast ratio of 12.6 percent going forward would distort your forecast of free cash flow. How should the balance sheet be reorganized to prevent this? Note 4-Supplemental financial information Selected components of current and noncurrent liabilities were as follows: $ million Accrued and other liabilities-current Year 1 2,833.0 Marketing and promotion Compensation expenses Accrued ShaveCo exit costs 1,846.0 456.0 Taxes payable 922.0 Other 102.0 Total 6,159.0

DAS Co. is preparing its financial forecast for next year and its AFN is negative. This means that Select one: O a. the predicted change in total assets must be negative. O b. sales growth must be negative. O c. the dividend payout ratio must be greater than the predicted growth rate in sales. O d. the predicted change in spontaneous liabilities must be greater than the predicted change in total assets.

(Related to Checkpoint 4.1) (Liquidity analysis) Airspot Motors, Inc. has $2,517,200 in current assets and $868,000 in current liabilities. The company's managers want to increase the firm's inventory, which will be financed using short-term debt. How much can the firm increase its inventory without its current ratio falling below 2.1 (assuming all other current assets and current liabilities remain constant)? Airspot Motors, Inc. could add up to $ in inventories. (Round to the nearest dollar.)

Halverson's times interest earned ratio was 2.98 in 2022, 2.79 in 2021, and 2.31 in 2020. Which of the following statements about the ratio is correct? Multiple Choice The increasing ratio implies increased long-term debt financing The increasing ratio indicates decreasing levels of debt on which interest is incurred The increasing ratio would be considered by creditors to be an indicator of higher risk The increasing ratio indicates the strategy of pursuing growth by investment in other companies, which has increased debt, but Halverson's profts have not yet increased from those investments.

Consider the following sensitivity analysis of EBIT and earnings per share (EPS)  where $34,000 is the expected level of EBIT after the acquisition and $20,000 is the recession level of EBIT that might be anticipated. What other information can be interpreted from the chart below? EBIT DEPS EEPS           5,000 0.00 0.40           12,500 1.00 1.00           20,000 2.00 1.60   Recession Level EBIT (-22%)   34,000 3.87 2.72   Expected EBIT

This is an example prioblem. I need help understanding the math that is being done?

A firm wants to strengthen its financial position. Which of the following actions would increase its current ratio?   1. b. Reduce   the company's days' sales outstanding to the industry average and use the   resulting cash savings to purchase plant and equipment.   2. d. Borrow   using short-term debt and use the proceeds to repay debt that has a maturity   of more than one year.   3. e. Issue new   stock and then use some of the proceeds to purchase additional inventory and   hold the remainder as cash.   4. a. Use cash   to increase inventory holdings.   5. c. Use cash   to repurchase some of the company's own stock.

H5. Solve both question with proper step by step calculation

Suppose that in 2023, Global launched an aggressive marketing campaign that boosted 2023 sales further by 15.8%. However, their operating margin fell from 5.76% to 3.98%. Suppose that they had no other income, interest expenses were unchanged, and taxes were the same percentage of pretax income (26%) as in 2022. Global Corp. initially projected the 2023 income statement shown in the following table: a. What was Global's EBIT in 2023? b. What was Global's net income in 2023? c. If Global's P/E ratio (18.0) and number of shares outstanding (3.6 million) remained unchanged, what was Global's share price in 2023?

Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2019 are as follows: ($ millions) Net income Investment Free cash flow 2020 1.0 1.0 0 2021 2022 2.5 4.2 1.5 1.7 1.0 2.5 2023 4.70 1.9 2.8 2024 5.0 1.9 3.1 Phoenix's recovery will be complete by 2024, and there will be no further growth in net income or free cash flow. a) Calculate the PV of free cash flow, assuming a cost of equity of 10%. b) Assume that Phoenix has 12 million shares outstanding. What is the price per share?

(Related to Checkpoint 13.1) (Forecasting cash flows using the expected value) Koch Transportation is contemplating the acquisition of LH Transport, a competing trucking firm. Koch's CFO estimates that during the next year LH Transport's cash flows from the acquisition will vary depending on the state of the local economy: a. Calculate the expected cash flow for next year using the estimates provided above. b. Assume the probability of a recession increases to 38 percent, the normal scenario probability remains at 53 percent, and the expansion probability drops to only 9 percent. What is your estimate of the expected cash flow for next year under these circumstances? c. Your analysis of the acquisition suggests that for the investment to have at least a zero NPV, it must produce an annual expected cash flow of $83,610 per year over the next five years. Assuming that the cash flow you estimated in part a is the expected cash flow for Years one through five, what would you like to know…

Which of the following is​ true? I. If there is no change in gross fixed assets from one year to the​ next, then net fixed assets would have to have decreased. II. For firms with lower​ P/E ratios, investors are valuing each dollar of earnings more than for firms with higher​ P/E ratios. III. A increase in the current ratio indicates an improvement in a​ firm's long-term solvency condition.

​(Liquidity analysis) Airspot​ Motors, Inc. has $2,172,500 in current assets and $869,000 in current liabilities. The​ company's managers want to increase the​ firm's inventory, which will be financed using​ short-term debt. How much can the firm increase its inventory without its current ratio falling below 2.1 ​(assuming all other current assets and current liabilities remain​ constant)?

Your company doesn't face any taxes and has $755 million in assets, currently financed entirely with equity. Equity is worth $50.50 per share, and book value of equity is equal to market value of equity. Also, let's assume that the firm's expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities as shown below: State Recession Average Boom   Probability of State .20 .60 .20   Expect EBIT in State $105 million $180 million $240 million The firm is considering switching to a 20-percent debt capital structure, and has determined that they would have to pay a 10 percent yield on perpetual debt in either event. What will be the standard deviation in EPS if they switch to the proposed capital structure? (Round your intermediate calculations and final answer to 2 decimal places except calculation of number of shares which should be rounded to nearest whole number.)

Phoenix Corp, faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2019 are as follows: (5 millions) 2020 2021 2022 2023 Net income 1.0 1.0 Investment Free cash flow 0 2.0 3.2 3.71 1.0 1.2 1.4 1.0 2.0 2.3 Present value Phoenix's recovery will be complete by 2024, and there will be no further growth in net income or free cash flow (it will remain constant at $2.6 million after 2024). 2024 4.0 a. Calculate the PV of free cash flow, assuming a cost of equity of 9%. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Price per share 1.4 2.6 million b. Assume that Phoenix has 12 million shares outstanding. What is the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Bob's Inc has the following balance sheet and income statement data  see image... The new CFO thinks that inventory are excessive and could be lowered to cause the current ratio to equal industry average 3.00 w/o affecting either sales or net income. assuming that inventories are sold off and not replaced to get the current ratio to the target level and that the funds generated are used to buy back common stock at book value, by how much would the ROE change?

Solve all of the following problems:   The Smith company has $2,392,500 in current assets and $1,076,625 in current liabilities. Its initial inventory level is $526,350 and it will raise funds as additional notes payable (short-term) and use them to increase inventory. How much can its short-term debt (notes payable) increase so that the company can maintain a current ratio of 2.0?   Assume the following information for Brandon Corporation:   Sales/Total assets = 1.3 Return on assets (ROA) = 4% Return on equity (ROE) = 7%   Calculate the firm’s profit margin and debt-to-capital ratio assuming that the firm uses only debt and common equity, so total assets equal total invested capital.   Cooper Industries’ net income is $24,000. Its interest expense is $5,000 and its tax rate is 25%. Its notes payables equal $27,000, long-term debt equals $75,000, and common equity equals $250,000. The firm finances with only debt and common equity. Calculate the firm’s ROE and ROIC.   Tanaz Inc.…

Which of the following actions can a firm take to increase its current ratio? A. Issue short-term debt and use the proceeds to buy back long-term debt with a maturity of more than one year.  B. Reduce the company's days sales outstanding to the industry average and use the resulting cash savings to purchase plant and equipment.  C. Use cash to purchase additional inventory.  D. Statements a and b are correct.  E. None of the statements above is correct.

The finance staff at Millcreek Company have constructed a forecast of the company’s net income.The chief executive officer (CEO) of Millcreek wonders why the forecast of next year’s interestexpense is the same as this year’s interest expense, whereas next year’s sales are expected toincrease by 20% over this year’s sales. What is the most likely explanation?a) Millcreek is expected to be more aggressive at minimizing its income tax expense next yearb) Millcreek expects its operating expenses to increase by 20% next year, the same as the expectedincrease in salesc) Millcreek is not expected to obtain any new loans next year, not repay any old loansd) Millcreek expects its operating expenses to increase by more than 20% increase in salesexpected next year