Financial decision making
Contents Introduction: 1 Task: 1 1 (a) Ratio analysis on the basis of AstraZeneca Annual Report and Form 20-F Information 2012: 1 (b) Business structure and financial structure (comparison and relative advantages of the chosen organization) 5 (c) Compare and comment on the finances of business: 7 (d)Recommend potential investor for the investment decision: 8 (e)All possible Sources of finance for 500000 and best source 8 (f) Management of working capital: 10 Task 2: 11 (a)Preparations of a cash flow forecast and comment on budget and cash flow: 11 (b)Recommendation for managing cash flow: 12 Task 3: 12 (a)Assessment of projects by financial techniques: 12 (b) Recommendation from the above
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Here the position of 2011 is more efficient than in 2011.
Working capital turnover: This ratio indicates company’s ability to generate revenue with the working capital. The difference between the current asset and the current liability can be termed as the working capital.
Formula: Revenue / average working capital
Calculations: 2012 = 27973 / {(19048 – 13903) + (23506 - 15752)} / 2 = 4.340 2011 = 33591 / {(23506 - 15752) + (25131 - 16787)} / 2 = 4.170
Interpretations: the position of the working capital ratio in 2012 is better than in 2011.
Receivable turnover: receivable turnover represents the efficiency of collecting payment from the account receivables or the debtors.
Formula: Revenue / average account receivables
Calculations: 2012 = 27973 / (7629 + 8754) / 2 = 3.410 times 2011 = 33591 / (8754 + 7847) / 2 = 4.050 times
Interpretations: the rate of collection from the customers in 2011 is higher than in2012. So, the efficiency in respect of the collection decreases in the recent year.
Solvency ratios:
Company’s ability to pay long term obligations can be termed as solvency. This ratio indicates company’s efficiency to pay long term debt and obligations.
The most commonly used ratios for the solvency are: 1. Debt to asset ratio 2. Debt to equity ratio 3. Financial leverage
Debt to asset ratio: the percentage of total asset that is financed by
Option | Probability of Occurring | 2011 | 2012 | 2013 | 2014 | 2015 | Total |
($372 + $135 + 500) / ($2.21 - ($0.83 + .40)) = 1,028 [+/- 31]
7. A company finds that its fixed asset turnover (net sales/fixed assets) has fallen below one. What does this indicate?
The working capital also has a direct relationship with the company’s current assets and current liabilities. The working capital should be positive in order to be considered good. To determine the working capital the current liabilities are subtracted from the current assets. As in the current ratio example the same pattern will show in the working capital. It will decline from 2010 to 2011 and then will become negative in 2012. This pattern shows a decline in Tesla Motors ability to use current resources to repay its debts.
In the year 2016 I inputted an amount of $6400.00 from January through August. From September through December an amount of $2400.00. For a total of $8800.00
year 2 is $23.64 or $33.64. In each case the market expects the firm to earn 10%
Intercept: If no years have passed since 1977, then the predicted amount of home runs will be 1.398.
Second City Options (SCO) is a small firm that specializes in option trading. Employing 35 people, SCO is located on LaSalle Street in the Chicago financial district. It is a member firm of the Chicago Board Options Exchange (CBOE), where it trades options on stocks and stock indices. It is also a member firm of the Chicago Mercantile Exchange Group (CME Group), where it trades options on futures and the underlying futures contracts.
Also, according to its leverage ratios, the company’s debts are not only very high, but are also increasing. Its decreasing TIE ratio indicates that its capability to pay interests is decreasing. The company’s efficiency ratios indicate that despite the fact that its fixed assets are increasingly being utilized to generate sales during the years 1990-1991 as indicated by its increasing fixed asset turnover ratio, the decreasing total assets turnover indicate that overall the company’s total assets are not efficiently being put to use. Thus, as a whole its asset management is becoming less efficient. Last but not the least, based on its profitability ratios, the company’s ability to make profit is decreasing.
Based on Next Annual Report and Account January (2011), the chief executive's review present the A New Normal of company overview, due to the changing consumer environment, Next PLC need to have New avenues of growth, and brand new way to control cost, also, it will be important that retailer have to generate the healthy cash flow with cautious management. Furthermore, enable to know how company efficiently use asset to generate revenue and whether there was improvement between 2010 and 2011, the activity ratios have to calculate out. The ROCE in 2010 and 2011 were 38.91%,41.79%, this number showed how profit generated by capital employed, and the growth figure of ROCE lead to level up efficiency asset used.((NEXT PLC, 2011 page43, 45) The figure for inventory turnover, receivable turnover, and payable turnover in 2010 and 2011 were 46.81 days, 54.98 days; 66.07days, 68.23 days; 83.36days,81.3days; respectively. (ibid) It is clearly show that the inventory and receivable turnover in 2010 was taken lesser day than 2011, in which means inventories took less day to sold out to costumer and the cash credit receive more faster than the 2011, besides, the payable turnover had longer period than 2011, it was also a good example to illustrate that there was more cash flow holding by company, and the overall image of these figure present that the resource had been
Interco's overall financial health is relatively healthy. It is highly-liquid as the current ratios are consistently over 3.5, showing that it has plenty of cash to cover any of its current liabilities. Its accounts receivable days indicate that in 1987 it took longer to collect on outstanding accounts while this figure would drop in 1988. The same trend follows with its inventory days, increasing in 1987 and decreasing in 1988, which would signal that its turnover was slower in 1987 and faster in 1988. The accounts payable days increased in 1987 while slightly decreasing in 1988. This is a healthy trend as Interco was able to take
The aim of this paper is to analyse the financial position of Melbourne IT limited through the use of financial ratios, based on the annual report for the periods December 2012 and 2013. Financial ratios are useful since they measure a company’s performance and give an overview of the financial situation. Ratios are also used to analyse trends and to compare a firms financial figures to other competitors within the same industry.
The firm’s accounts receivable ratio increased from 68.71 in 2006 to 74.56 in 2010. This means that it is taking Abbott almost six days longer to collect from its customers today than it did five years ago. Furthermore, the firm’s accounts payable days has decreased from 43.72 in 2006 to 38.22 in 2010. This means that Abbott is paying its suppliers 5½ days earlier today than it did in 2006. A change in the inventory ratio from 8.01 in 2006 to 11.03 in 2010 indicates that it is taking the firm longer to sell finished goods than it used to. The increase in the accounts receivable and inventory ratios, combined with a decrease in the accounts payable ratio, indicates poor working capital management and helps to explain why the firm has increased its holdings of cash and short-term investments. To correct this, Abbott’s managers should focus on collecting cash from its customers faster and delaying payments to its suppliers. To maximize its cash position, the firm would be best served by paying its suppliers in the same amount of time as it collects payment from its customers.
Accounts receivable turnover measures the average time it takes for a firm to collect on credit sales. Harley Davidson's accounts receivable turnover rate is 6.75 times for 2001 and 8.74 times for 2000. This accounts receivable turnover rate seems low and would indicate that Harley Davidson is able to turn their receivables into cash quickly.
Asset turnover ratio is also increasing in 1994. It shows that total assets are being efficiently used in producing revenues.