A member of the board of directors is puzzled by the fact that the firm has had a very profitable year but does not have enough cash to pay its bills on time. Explain to the director how a firm can be profitable, yet not have enough cash to pay its bills and dividends.
Q: Under Modigliani and Miller's assumption of perfect capital markets, which of the following is NOT…
A: According to the assumption of perfect capital markets that Modigliani and Miller have made, the key…
Q: Garida Co. is considering an investment that will have the following sales, variable costs, and…
A: Net present value (NPV) is the difference between the present value of cash inflows and the present…
Q: A stock has returns of 18 percent, 15 percent, -21 percent, and 6 percent for the past four years.…
A: xmean(x-mean)(x-mean)2 184.513.5182.25154.510.5110.25-214.5-25.5650.2564.51.52.25…
Q: Example 9-1: Suppose that on March 13, 2020, a U.S. firm plans to purchase 3 million Swiss francs'…
A: What is the initial amount needed in $ for the 3 million Swiss francs?From the text, we can find…
Q: D Question 12 Based on IRR, ABC should accept: all three only A and B only A and C only C none.
A: Step 1:All three projects are mutually exclusive which means we can invest only in one project among…
Q: I think we all use the “economic model" when shopping for groceries these days. I find myself…
A: According to the economic model, customers are rational and will always choose the choice that…
Q: ! Required information [The following information applies to the questions displayed below.] A…
A: The objective of the question is to find the optimal risky portfolio by calculating the proportions…
Q: An insurance broker whose registration is "restricted to oftine following activities? Acting Under…
A: - **Deposit insurance premiums in their own trust bank account.**This activity is generally reserved…
Q: Global Enterprises has just signed a $3 million (nominal value) contract. The contract calls for a…
A: Given information: (cashflows in million) Cash flow in year 0 (CF0) = $0.5 Cash flow in year 1 (CF1)…
Q: A six-month call is the right to buy stock at $19. Currently, the stock is selling for $22, and the…
A: Answer a) Covered call writing The covered call is an options strategy wherein an investor sells a…
Q: We know that there exists both provincial tax and surtax in Ontario. The provincial taxbrackets and…
A: Part A: Finding Income Levels for Provincial TaxHere, we used the provided tax rates and desired tax…
Q: Please step by step solutions this finanas question
A: Step 1: Low Cost: Vanguard has utilized the passive index investing strategy to provide low-cost…
Q: if the Marifield Steel Fabrication Company earned $470 in net income and paid a cash dividend of…
A: To calculate the Earnings Per Share (EPS) for Marifield Steel Fabrication Company, we use the…
Q: Please answer in typing format
A: As per Dividend Discount Model- Current Share Price = Dividend in year 1/(Cost of capital-Growth…
Q: Question 13 (Mandatory) (1 point) Duration is a measure of bond price sensitivity to interest rate…
A: True. Duration is indeed a measure of a bond's price sensitivity to changes in interest rates. A…
Q: bond pays $5000 in 25 years an earns an annual interest rate of 4.75%. What is the bond's price?…
A: Approach to solving the question:For better clarity of the solution, I have provided the calculation…
Q: Cristiano Orlando, president of Better Juice Ltd, is considering the purchase of a machine that will…
A: The following formula may be used to determine each machine's equivalent annual series (EAS):EAS =…
Q: Franks is looking at a new sausage system with an installed cost of $385,000. This depreciated…
A: The annual straight-line depreciation is calculated using the formula= Initial investment in the…
Q: You are starting to invest in your 401k plan at work. Please answer the following: Assume that you…
A: A 401(k) balance of approximately $94,000 after ten years and $761,000 after thirty years might be…
Q: In the Housing Data sheet:(a) Compute the different Percentiles for the Price column – NE Sector =…
A: To compute the percentiles for the Price column based on whether the NE Sector is 'Yes', 'No', or…
Q: The following information is available about an investment opportunity: Initial Capital…
A: Step 1:Computation of initial investmentInitial investment=Initial capital expenditure + Increase in…
Q: The following is cash flow data for Rocket Transport: Cash dividend Purchase of bus Interest paid on…
A: A) Net cash provided by or used in investing activities Investing activities typically include cash…
Q: None
A: Answer information:Step 1:1. First, let's structure the given information about Jane Doe as…
Q: A project has annual cash flows of $6,500 for the next 10 years and then $7,500 each year for the…
A: Calculate the project's NPV using Excel as follows:Formula sheet:Note:To understand the calculation…
Q: DRIPS. Western Railroad has a dividend reinvestment plan for shareholders. From 2010 to 2014, the…
A: Answer information: Number of shares in Hand at beginning [a]Dividend receivedShares purchased…
Q: Lois Clark bought a ring for $6,700. She must still pay a 5% sales tax and a 10% excise tax. The…
A: Given, Purchase cost of ring = $6700Sales tax = 5% = 0.05Excise tax = 10% = 0.10Shipping charge =…
Q: Analytical VaR Use the table below at the given level of accuracy: Critical values for VaR…
A: Step 1: Understanding the definitionsThe Value at Risk (VaR) indicates the maximum loss expected…
Q: Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed…
A: Part A: Calculating Operating Cash Flow (OCF)Calculate Earnings Before Interest and Taxes…
Q: 7- Dyer Furniture is expected to pay a dividend of D1 = $1.25 per share at the end of the year, and…
A: Step 1:We have to calculate the current stock price using the Gordon growth model. For this, we have…
Q: A U.S. company has British pound 2 million payables in 90 days. The company decide to use option…
A: To calculate the US dollar cost or net revenue of the US company at the expiration date of the…
Q: You and a coworker are analyzing two proposed capital investments with the following cash flows:…
A: The Profitability Index (PI) is calculated using the formula:PI=InitialInvestmentPV of Future Cash…
Q: None
A: Step 1:Type of CapitalProportionCostProp.*CostDebt0.20.040.008Equity0.80.1050.084Total1 0.092…
Q: Mackenzie Company has a price of $32 and will issue a dividend of $2.00 next year. It has a beta of…
A: a.Risk free rate = 5.90%Risk Premium = 4.80%Beta = 1.10Cost of Equity is calculated below using CAPM…
Q: The world airline system is composed of the routes X and Y, each of which requires 14 aircraft.…
A: Let's tackle each section of the issue one at a time:a-1. We must analyze the operational costs of…
Q: Operating leases are examples of off‑the‑balance‑sheet financing. True or False?
A: Step 1: Meaning of operating leaseAn operating lease is a type of lease agreement where the lessee…
Q: You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 18…
A: note that a negative risk premium indicates that the investment has underperformed the real…
Q: Please show all work ง 5. Evaluate the vector surface integral JJ (+2², x + 2y + 32², 5x − 2y + 2³)…
A:
Q: (Related to Checkpoint 11.1 and Checkpoint 11.4) (NPV and IRR calculation) East Coast Television is…
A: Step 1:a)We have to calculate the initial investment amount.Internal rate return states that it is…
Q: Week 14 Discussion: Comparing the Primary Sources and Uses of Cash A+ The statement of Cash Flows is…
A: Other reason is that cash flows from the operation is section has the most volatile character than…
Q: Raghubhai
A: Here's a detailed explanation for better understanding. Pessimistic Scenario:Revenue:…
Q: Vital Silence, Inc., has a project with the following cash flows: Year Cash Flow 0 $27,300 11,300 2…
A: Given information: Initial investment (CF0) = -$27,300 Cashflow in year 1 (CF1) = $11,300 Cashflow…
Q: Here are simplified financial statements for Phone Corporation in 2020: INCOME STATEMENT (Figures in…
A:
Q: Am. 102.
A:
Q: Juan purchases an annuity for $3720 that will make 20 annual payments, the first to come in one…
A: In summary from the step-by-step explanation above,To calculate the annual payment of an annuity…
Q: Fully depreciated equipment costing $60,000 was discarded, with no salvage value. What effect would…
A: Discarding fully depreciated machinery, with no salvage value will have no effect on statement of…
Q: The overall width of the house is 37 feet, and the overall length is 53 feet. If this house is…
A: Step 1: Step 2:Step 3:Step 4:So, the value of this house per square foot $235.91
Q: The futures price of gold is $800. Futures contracts are for 100 ounces of gold, and the margin…
A: 1. Initial RemittanceThe initial amount you must remit for a futures contract is simply the initial…
Q: Am. 101.
A: a. When calculating the discount rate, the after-tax cost of additional debt is taken into…
Q: Jus part I) and Ii)
A: (i) Accumulated Amount at Time t (Step-by-Step)We're interested in finding the future value…
Q: ed Erna Corporation is evaluating an extra dividend versus a share repurchase. In either case,…
A: b. Calculating the EPS (earnings per share) and PE (price-to-earnings) ratio is essential for…
A member of the board of directors is puzzled by the fact that the firm has had a very profitable year but does not have enough cash to pay its bills on time. Explain to the director how a firm can be profitable, yet not have enough cash to pay its bills and dividends.
Step by step
Solved in 2 steps
- Assume you are the controller of a large corporation, and the chief executive officer (CEO) has requested that you explain to them why the net income that you are reporting for the year is so low, when the CEO knows for a fact that the cash accounts are much higher at the end of the year than they were at the beginning of the year. Write a memo to the CEO to offer some possible explanations for the disparity between financial statement net income and the change in cash during the year.Assume you are the controller of a large corporation, and the chief executive officer (CEO) has requested that you explain to them why the net income that you are reporting for the year is so low, when the CEO knows for a fact that the cash accounts are much higher at the end of the year than they were at the beginning of the year. Write a memo to the CEO to offer some possible explanations for the disparity between financial statement net income and the change in cash during the year.Assume you are the controller of a large corporation and the ceo has requested that you explain to them why the net income that you are reporting for the year is so low when the cell owes for a fact that cash accounts are much higher at the end of the year than they were at the beginning of the year write a memo to the ceo to offer some possible explanations for the disparity between financial statement net income and the change in cash during the year
- Which of the following is an example of “cookie jar” accounting? a) A company creates cash reserves in profitable years so the money can be used to offset poor earnings in bad years to give the impression that the company is consistently achieving earnings goals and meeting investor expectations. b)A company intentionally misapplies GAAP and, if caught, argues that the earnings effect is “immaterial” and the error is not worth correcting. c)A company takes a one-time charge against income in order to reduce assets, which results in lower expenses in the future. d) A company recognizes revenues before it is appropriate to do so.Assume you are the financial director of a public company which has been experiencing a decline in financial performance. At a board meeting it is being proposed that all directors and senior managers receive a substantial increase in pay and bonuses. One director has stated that the figures can be masked, legitimately, in the annual report and accounts. It has also been proposed not to increase the dividend to shareholders, stating that the money is needed for essential investment. The company does have assets which are in need of replacement. What do you think about these proposals? Do they suggest good, bad, or indifferent corporate governance?A senior financial executive for a large public company remarked to a stock market analyst: I don ’ t know why you people worry so much about what is in our statement of cash flows. Managing cash flow is our responsibility as managers; it involves paying close attention to cash on a daily basis. Why don ’ t you pay attention to our profit and just forget about cash flow? We ’ ll look after that! Respond to the executive ’ s comments. You do not have to agree or disagree entirely.
- Suppose you are the chief financial officer (CFO) responsible for the financial statements of Philip Morris. What ethical issue would you face as you consider what to report in your company’s annual report about the cash payments? What is the ethical course of action for you to take in this situation? Who are the stakeholder of this company?When a company reports financial numbers thatare lower than expected, generallya. the company’s stock value will increase.b. the company’s stock value will decrease.c. the company will restate its earnings amount.d. the stockholders’ will immediately ask for anaudit.e. the corporate officers will resign and newofficers will be appointed.One of the key reasons that businesses fail is due to improper capital planning and a general lack of working capital (aka liquidity). It also happens to be one of the key reasons why people fail too. In personal finance, we know that you should have 3 to 6 months’ worth of money set aside for emergencies, but what does it take to make sure that a business is properly liquid?
- 1. Identify two warning signals that could have negative implications with respect to the company’s ability to generate cash flows to meet its future needs. In each case, explain why the signal you have identified could reflect a cash flow problem. 2. At the annual general meeting of White Star, the managing director, Ms. Rose Dawson, made the following statement: ‘ Recently a number of articles in the financial press have questioned the financial position of our company. This criticism is totally unjustified. Net profit was $25 million and total assets have increased by $160 million. These results show that 2019 was a very successful year for White Star. ’ Comment on Ms. Dawson’s statement. Info: WR: 2018 = 380m 2019 = 395 m CR: 2018 = 1.8m 2019 = 1.6m QR: 2018 = 1.2m 2019 = 0.9m Debt-to-equity ratio: 2018 = 0.85 times 2019 = 0.68 times Return-on-equity ratio: 2018 = 8.33 % 2019 = 12.26% Earnings per share: 2018 = 0.312m 2019 = 0.475m Net operating profit after tax is $25…You are considering an investment in a new start-up company, Giraffe Inc., an Internet service provider. A review of the company’s financial statements reveals a negative retained earnings. In addition, it appears as though the company has been running a negative cash flow from operating activities since the company’s inception.How is the company staying in business under these circumstances? Could this be a good investment?Bansi Breken is a financial institution that provides loans to businesses. It rejects an iron ore company's request for a loan after it reviews the value of the company's assets, liabilities, and owners' equity and finds them to be unsatisfactory. In this scenario, Bansi Breken most likely analyzed the company's _____ to assess its financial condition. Group of answer choices balance sheet operating budget income statement statement of cash flows