Llf Fundamentals Of Financial
15th Edition
ISBN: 9781337395267
Author: Brigham
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 14, Problem 2TCL
Exploring the Capital Structures for Four Restaurant Companies
Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions.
This chapter provides an overview of the effects of leverage and describes the process that firms use to determine their optimal capital structure. The chapter also indicates that capital structures tend to vary across industries and across countries. If you are interested in explonng these differences in more detail, the Momingstar website provides information about the capital structures of each of the companies it follows. The following discussion questions demonstrate how we can use this information to evaluate the capital structures for four restaurant companies: Cheesecake Factory (CAKE), Chipotle Mexican Grill (CMG), Ruby Tuesday (RT), and Darden Restaurants Inc. (DR1).
2. Repeat this procedure for the other three companies. Do you find similar capital structures for each of the four companies? Do you find that the capital structures have moved in the same direction over the past 5 years, or have the different companies changed their capital structures in different ways over the past 5 years?
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shortly explain all the capital structure theories and compare them with your own words (no copy paste from somewhere. Use your own book as reference.) Then randomly choose three companies enlisted in Borsa İstanbul and analyze their balance sheet. Write your comments about their capital structure and analyze with regard to risk and profitability.
FINANCIAL MANAGEMENT II COURSE QUESTİON
What can be added to this or what comment can made?
The weighted average cost of capital (WACC) is a useful measure for businesses deciding whether or not to invest. WACC is a financial model that helps companies understand how investment decisions will effect their finances. Companies and investors will be able to determine whether or not to proceed with investment initiatives based on the information offered by applying WACC calculations, such as a company's share value. WACC will be used by financial analysts to determine critical investing parameters such as the net present value of a firm and the potential for future cash flows. WACC is used to complete these computations, and the result is divided by the number of shareholders' equity.
Below you have the three types of financial management decisions. Match each type of decision to a business transaction that would be relevant.
Capital budgeting
A. Deciding whether to issue new equity and use the proceeds to retire outstanding debt
Capital structure
B. Deciding whether to expand a manufacturing plant
Working capital management
C. Modifying the firm's credit collection policy with its customers
Chapter 14 Solutions
Llf Fundamentals Of Financial
Ch. 14 - Changes in sales cause changes in profits. Would...Ch. 14 - Would each of the following increase, decrease, or...Ch. 14 - Discuss the following statement: All else equal,...Ch. 14 - Prob. 4QCh. 14 - Prob. 5QCh. 14 - Why do public utilities generally use different...Ch. 14 - Why is EBIT generally considered independent of...Ch. 14 - Is the dept level that maximizes a firms expected...Ch. 14 - If a firm goes from zero dept to successively...Ch. 14 - Prob. 10Q
Ch. 14 - A firm is about to double its assets to serve its...Ch. 14 - BREAK-EVEN ANALYSIS A company's fixed operating...Ch. 14 - OPTIMAL CAPITAL STRUCTURE Terrell Trucking Company...Ch. 14 - Prob. 3PCh. 14 - UNLEVERED BETA Hartman Motor has. 18 million in...Ch. 14 - FINANCIAL LEVERAGE EFFECTS Firms HL and LL are...Ch. 14 - Prob. 6PCh. 14 - Prob. 7PCh. 14 - HAMADA EQUATION Situational Software Co. (SSC) is...Ch. 14 - RECAPITALIZATION Tartan industries currently has...Ch. 14 - BREAKEVEN AND OPERATING LEVERAGE a. Given the...Ch. 14 - RECAPITALIZATION Currently, Forever Flowers Inc....Ch. 14 - BREAKEVEN AND LEVERAGE Wingler Communications...Ch. 14 - FINANCING ALTERNATIVES The Severn Company plans to...Ch. 14 - WACC AND OPTIMAL CAPITAL STRUCTURE Elliott...Ch. 14 - Prob. 1TCLCh. 14 - Exploring the Capital Structures for Four...
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- Efficiency Does CEB manage efficiently its working capital (current assets and current liabilities)? (Justify using cash conversion cycle). When comparing the two companies, which between the two is more efficient?arrow_forwardUsing this link: https://massygroup.com/wp-content/uploads/2022/11/MASSY-DIGITAL-ANNUALREPORT-2022-updated.pdf answer the following questions Working Capital Management: a) Assess the company’s working capital position by analyzing its current assets and liabilities using common methods and measures. b) Evaluate the efficiency of the company’s working capital management strategies, including inventory management, accounts receivable, and accounts payable. c) Based on your assessment and evaluation above, provide brief recommendations in point form for improving the company’s working capital management practices.arrow_forwardWorking capital management includes which one of the following? OA. Deciding which new projects to accept B. Deciding whether to purchase a new machine or fix a currently owned machine OC. Determining which customers will be granted credit OD. Determining how many new shares of stock should be issued OE. Establishing the target debt-equity ratioarrow_forward
- 5. Given the changing business conditions because of COVID 19 you company is concerned about its working capital management. The top management will has directed that you prepare a briefing note for them on the important issue of working capital management. Why is management of short-term capital or working capital critical for all businesses and for small businesses. Typically, how does the short-term capital market work? What are the different strategies that can be adopted in the management of working capital?arrow_forwardBarnes plans to use the preceding ratios as the starting point for discussions with SKI’s operating executives. He wants everyone to think about the pros and cons of changing each type of current asset and how changes would interact to affect profits and EVA. Based on the data, does SKI seem to be following a relaxed, moderate, or restricted working capital policy?arrow_forwardDescribe the factors that influence the capital structure decisions of a company, i.e. explain the trade-off theory and the pecking order theory of capital structure and discuss how these theories can help Santiago Ltd. in making informed decisions regarding its capital structure.arrow_forward
- explain that when developing a working capital policy, the entrepreneur determines the joint impact of the level of working capital investment and financing on profitability and risk,and Compare the three alternative working capital policies. Which policy would you consider implementing should you want a venture to show a higher expected profitability?arrow_forwardhi tutor, please help to answer this coursework management accounting subject.arrow_forwardWhich question reflects a decision regarding working capital management? Select one: a. Should the company issue new shares or borrow money? b. Should the company replace its older equipment with a new equipment in order to increase sales? c. What is the maximum amount of accounts receivable that the company should have at a particular time? d. How much should the company borrow to buy a new machine?arrow_forward
- Managers can choose from several analytical techniques to help them make capital investment decisions. Each technique has advantages and disadvantages. Respond to the following in a minimum of 175 words: Provide an example or brief business case in which you can apply the NPV, IRR or payback concepts to make the most adequate financial decision. Select one of the techniques - NPV, IRR, or payback and explain why you would choose this technique as well as any disadvantages when compared to the others.arrow_forwardDetermine the decision (the investment decision, or the financing decision, or the dividend policy decision) nature of each of the following issues: a) What are the least expensive sources of funds for the firm? b) large retailer such as LuLu Hypermarket, deciding whether to open another store? c) Will we purchase on credit or will we borrow in the short term and pay cash? d) The decision to develop and market a new software by a company such as Microsoft. f) Choosing among lenders and among loan types?arrow_forwardQuestions How would you assess the evolution of the capital structure of LGI? Reflecting on your work in Project 1, would you consider the risk exposure under control? If not, what are your recommendations? [insert your answer here] What kind of information do you find valuable in CAPM to guide you in assessing the risk of LGI compared to other firms and the market in general? [insert your answer here] 3. Identify and differentiate the stakeholders of LGI and explain how each one should perceive and weigh the risk and/or return of the firm. [insert your answer here] Would you consider the investment made in Project 4 optimally financed considering the proportion of debt that is bearable by LGI? How did the current WACC in Project 5 depart from the state of the firm in Project 1? [insert your answer here] 1.If you had to advise a potential investor interested in having a minority stake in LGI, what kind of information would you provide to help the…arrow_forward
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Working capital explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=XvHAlui-Bno;License: Standard Youtube License