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by: Mario Jacobson


Marketplace > San Diego State University > Finance > FIN323 > FUNDAMENTALSOFFINANCE
Mario Jacobson
GPA 3.53


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Class Notes
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This 2 page Class Notes was uploaded by Mario Jacobson on Tuesday October 20, 2015. The Class Notes belongs to FIN323 at San Diego State University taught by Staff in Fall. Since its upload, it has received 15 views. For similar materials see /class/225263/fin323-san-diego-state-university in Finance at San Diego State University.




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Date Created: 10/20/15
Fin 323 An exercise about a company Actually n 15 problem 2723 Rememberhow a balance 15 constructed and how an mcomc statementxs denved If you can remember mc very basx ideas behmd fmanmal statements you can work out mc answers to mc qucsuous below What can you say about this company Such a Haw liquid is this camp any Haw 21mm this cnmpany39 Haw prn tzhle is this cnmpany39 Asses Cash Accoums recewama Inventory Currenl assels Ne med assels Tulal assets Assels Cash Accnums recawame Invenmry Currem 3552 Net ruea assels mm assuzs Haw much dehtisused m nancethe cnmpany39 FIND vuun wnv BACK mu m Liabili es s 1500 Accuums uuyamc 253180 mes w 7 Currem nahmues s 54 m7 Lungarm dam swam anevs equuy Tulal hamlmes and 5542 407 ownurs Emmy qu vuun wnv BACK mc amne Sheelu m Dewa ananmes 5 mm Accuums payabla ewes Nmss 3 603 Currem Ixabvhhes s an m 5505 ass uwnars Emmy ms Incame Shlemem Sales Cnsl ur gocas sum Selhng a admxmslralwa Depvec alwun Em meresl EET Taxes Ncmcumc nwmeuus s moon Addman a mlzmed Earnings 5 55571 s mam 22570 5 amw szmnuu 5397 529 545095 Kyou attempt to answer these qucsuous you Wm ducoverthe ratiosquot foryourself So concentrate on y answers to get h Fr u Let s start with liquidity What would you want to look at The relative amount of liquid liabilities verse liquid assets What are liquid things called So Current AssetsCurrent liabilities might be one measure More liquid Get rid of Inventories which are less liquid than receivables so you would use Current Assets 7 Inventories Current liabilities Most liquid Cash Current liabilities How would you measure ef ciency Generally you would say something is efficient when it produces a lot of activity with very little in assets So let s use sales as our estimate of activity Then let s compare it to various assets that are being used One might be Sales to total assets called asset turnover Another might be Sales to Accounts Receivables receivable turnover Another might be Sales to inventory or maybe in this case it would be better to use a different measure of activity perhaps cost of goods sold Another might be Sales to Fixed Assets Now an alternative measure of efficiency could be in days rather than times All of these could be converted into days Since these are annual measures if you do something 10 times a year how many days does it take 36510 How pro table is a company Generally profits can be looked at absolutely or relatively In most cases we look relatively So you compare profits against something else So it might be net profits to sales This tells us something about the amount of dollars that are kept for each dollar of sales We could also measure it relative to our investment either in total assets or in equity dollars We could also use other measures of profits rather than net perhaps operating profits EBIT How much debt does the company use This again requires a relative answer So while we might just list the total amount of debt it is does not tell us much So again you might look relatively So how much does the firm owe relative to what it owns That would debt compared to total assets or you might compare debt to what the equity holder own You could also ask how many times you could pay your interest out of income So you would compare the income available to pay interest to the interest payment Cash Flows 0f the Firm Also let s look at the cash ows for this firm If you wanted to know how much cash was generated by the operating activities of this firm what would you look at First you take operating income EBIT and add back those things which are not cashidepreciation and take away the taxes What left can be invested in the firm either capital expenditures or working capital paid out to debt holders or paid to stockholders It is also possible to generate additional capital by borrowing or selling additional stock So you can get the Cash ow to stock holders and to creditors from this information So if take the operating cash ows and deduct the investments both short and long you should end up the cash going to the creditors and the stockholders To get a spreadsheet with solutions wwwvandenberginfo


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