Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN: 9781305176348

Author: WAHLEN, James M

Publisher: Cengage Learning

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Textbook Question

Chapter 10, Problem 4QE

Suppose you are analyzing a firm that is successfully executing a strategy that differentiates its products from those of its competitors. Because of this strategy, you project that next year the firm will generate 6.0% revenue growth from price increases and 3.0% revenue growth from sales volume increases. Assume that the firm’s production cost structure involves strictly variable costs. (That is, the cost to produce each unit of product remains the same.) Should you project that the firm’s gross profit will increase next year? If you project that the gross profit will increase, is the increase a result of volume growth, price growth, or both? Should you project that the firm’s gross profit margin (gross profit divided by sales) will increase next year? If you project that the gross profit margin will increase, is the increase a result of volume growth, price growth, or both?

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Chapter 10, Problem 3QE

Chapter 10, Problem 5QE

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You've collected the following information from your favorite financial website. 52-Week Price Dividend Hi 77.40 Lo Stock (Dividend) Yield % PE Ratio Close Price Net Change 10.43 Acevedo .36 2.6 6 13.90 -.24 55.81 33.42 Georgette, Incorporated 1.54 3.8 10 40.43 -.01 131.04 70.05 YBM 2.55 2.9 10 89.08 3.07 50.24 35.00 13.95 Manta Energy .80 5.2 6 20.74 Winter Sports .32 1.5 28 15.43 ?? -.26 .18 According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 21 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.75 percent, indefinitely. Assume investors require a return of 14 percent on YBM stock. According to the dividend growth model, what should the stock price be today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

1. Waterfront Inc. wishes to borrow on a short-term basis without reducing its current ratio below 1.25. At present its current assets and current liabilities are $1,600 and $1,000 respectively. How much can Waterfront Inc. borrow?

Question 3Footfall Manufacturing Ltd. reports the following financialinformation at the end of the current year:Net Sales $100,000Debtor’s turnover ratio (based onnet sales)2Inventory turnover ratio 1.25Fixed assets turnover ratio 0.8Debt to assets ratio 0.6Net profit margin 5%Gross profit margin 25%Return on investment 2%Use the given information to fill out the templates for incomestatement and balance sheet given below:Income Statement of Footfall Manufacturing Ltd. for the year endingDecember 31, 20XX(in $)Sales 100,000Cost of goodssoldGross profitOther expensesEarnings beforetaxTax @50%Earnings aftertaxBalance Sheet of Footfall Manufacturing Ltd. as at December 31, 20XX(in $)Liabilities Amount Assets AmountEquity Net fixed assetsLong termdebt50,000 InventoryShort termdebtDebtorsCashTOTAL TOTAL

Chapter 10 Solutions

Financial Reporting, Financial Statement Analysis and Valuation

Ch. 10 - Prob. 1QE Ch. 10 - The chapter encourages analysts to develop...Ch. 10 - Prob. 3QE Ch. 10 - Suppose you are analyzing a firm that is...Ch. 10 - Use the following hypothetical data for Walgreens...Ch. 10 - Prob. 6QE Ch. 10 - Prob. 7QE Ch. 10 - Prob. 8QE Ch. 10 - The Home Depot is a leading specialty retailer of...Ch. 10 - Prob. 10PC

Ch. 10 - Identify clues from the financial statements and...Ch. 10 - Design a spreadsheet for the preparation of...Ch. 10 - What advice would you give the management of MSC...

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