Kimberly McCullough
Colorado Christian University
College of Adult and Graduate Studies
BUS-301A, Business Finance
Professor Murphy
April 18, 2018
Analyzing Your Financial Ratios
In Chapter Case “Question 1. I will provide, the current ratio measures a company’s ability to pay short-term obligations. The quick ratio of S;S, which is an indicator of a company’s short-term liquidity. be sure to show your work in calculating the ratios including the ratios of the company. (In Chapter 3, page 8, Finkler, S. 2017). When it comes to their financial planning at S & S Air, Inc their financial manager will be able to understand. In Chapter Case 1, with S&S Air, Inc. with this business working capital management they must work with certain banks about their contribution to their goals and their success in their business.
S&S Air, Inc.
2016 Income Statement
S&S Air. Inc.
2016 Balance Sheet
Light Airplane Industry Ratios
Capital Budgeting
The case study presents two corporations (A and B) with different revenue values and expenses as well as variable depreciation expenses, tax rates and discount rates. When it comes to my mom and dad’s business applying suitable expenditure controls to ensure that investments outlays conform with. When it comes to capital budgeting my parent’s business they are determining the viability to long-term investments on purchase or replacement of property. (Dlabay, L. 2008, Chapter 3, pg.12-13)
Ratios and Financial Planning at S&S Air, Inc.”
Calculations
Chapter Case “Conch Republic Electronics”
Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelley Conc, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other household appliances. Over the years, the company expanded into manufacturing and is now a reputable manufacturer of various electronic items. Before launching a new series, the company need to go through the following steps as to ensure a smooth production of this new series.
1.1 10 Steps Before Launching New Products
As a business grows the question of the introducing new products/services arises. Launching new products/services means taking risks and managing change. Growth and change must be managed at the same time as on-going business operations. Maintaining momentum is challenging for small businesses with limited resources. (Mayo, H. 2017).
Questions
What is the payback period of the project?
What is the profitability index of the project?
What is the IRR of the project?
What is the NPV of the project?
All the cases are Excel-based?
First, The Cost of Research & Development
Second, for them to calculate networking capital for the next first two years their new smart phone company their smartphones prices generate erosion cost (negative side effect) to the existing smart phone. The loss from the total revenue of existing smart phone. The net incremental revenue of new smart phone is equal to the total revenue of new smart phone minus the total revenue loss from the existing smart phone.
The Revenue Loss of Existing Smart Phone Comes from Two Parts.
Part one: the sales units will be reduced, and the original price revenue on these sales unites will be gone (the sales units of the existing smart phone will fall by 30,000 units per year, and the price of the existing smart phone is $380 per unit).
Part Two: In Conch Republic Electronics finding of the sensitivity of change in quantity of the remaining units will be sold at a lower price (the price of the existing units will have to be lowered to $ 210 each), and the price difference is a source of revenue.
Take First Year for Example:
The calculation of net incremental revenue of the second year is like the first year. Starting from the third year, there is no revenue loss of existing smart phone attributed by the new smart phone, because the production of the existing smart phone is terminated. The incremental revenue is just the revenue of new smart phone. (Brigham, E. 2016, Chapter 5 pg. 9-10)
Third, when it comes to In Conch Republic Electronics cost they had to take their profitability and their credit worthiness. As a smartphone company they know that knowing the cost of capital it can make better decisions on its future investments and other such financing options. (Midgley, K. & Burns, R. 1997)
The calculation of net variable cost of the second year is like the first year. Starting from the third year, there is no variable cost decrease of new smart phone. The net variable cost is just the variable cost of new smart phone.
Four, when it comes to Conch Republic Electronics company they have to consider regarding asset acquisitions in other investments brought. Because it is a smartphone company calculating the fixed cost is just new smart phone’s fixed cost.
Chapter Case “Stephenson Real Estate Recapitalization”
In this report I will be discussing the work in an AJD real estate office from different aspects: Market surveying, the standard operating procedures that be followed in the market, suggestions to improve the work of AJD office. (Huber, W. 2009, Chapter 5, pg. 10-12)
1.2 Definitions:
Real estate is “Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; (also) an item of real property; (more generally) buildings or housing in general. Also: the business of real estate; the profession of buying, selling, or renting land, buildings or housing. It is a legal term used in most of the formal deals in this field. (Davis, M. 2012, Chapter 5, pg. 2-10)
“Stephenson Real Estate Recapitalization”
In order for Stephenson’s Real Estate recapitalization they have to effectively recapitalizing the companies by increasing the proportion of debt in the capital structure. Since Stephenson is an all-equity firm with 15 million shares of common stock outstanding, worth $35.20 per share, the market value of the firm is $528 million (= 15 million shares * $35.20 per share). Stephenson’s market-value balance sheet before the announcement of the land purchase is:
Because of the purchase, the firm’s pre-tax earnings will increase by $27 million per year in perpetuity. These earnings are taxed at a rate of 40%. Therefore, after taxes, the purchase increases the annual expected earnings of the firm by $16.2 million {($27 million) (1 – 0.40)}. (Peiser, R. & Hamilton, D. 2012)
Therefore, the net present value of the land purchase is $19.6 million.
After the announcement, the value of Stephenson will increase by $19.6 million, the net present value of the purchase. Under the efficient-market hypothesis, the market value of the firm’s equity will immediately rise to reflect the NPV of the project.
Therefore, the market value of Stephenson’s equity will be $547.6 million (= $528 million + $19.6 million) after the firm’s announcement.
Assessments and Measures
Direct Versus Indirect Measures of Assessment
The difference between direct and indirect measures of student learning has taken on new importance as accrediting agencies such as WASC have required the use of direct measures to be the primary source of evidence. Indirect measures may serve only as supporting evidence. (Linneman, P. 2010)
Embedded and Add-On Assessment
Embedded assessments are tasks that are integrated into specific courses. They usually involve classroom assessment techniques but are designed to collect specific information on program learning outcomes. (Claus, F. 2009)
Conclusion
What I have learned? This subject gave me an overview of key marketing concepts and techniques as they apply in a variety of organizations and in both conventional and online environments. Also, this subject helped me to develop my knowledge and understanding of the core role of marketing in determining the growth potential.
References
Ross, S., Westerfield, R., & Jordan, B. (2017). Essentials of Corporate Finance (9th ed.).
Dlabay, Les (2008) Business Finance (1st Edition)
Finkler, Steven (2017) Finance & Accounting for Nonfinancial Managers (5th Edition) Book – Softcover
Mayo, B. Herbert (2017) Basic Finance: An Introduction to Financial Institutions, Investments, and Management
Brigham, F. Eugene (2016) Fundamentals of Financial Management (14th ed.) Publisher: Cengage Learning
Huber, Wait (2009) Real Estate Finance – (7th edition)
Davis, Maria (2009) Accounting for Real Estate Transactions: A Guide for Public Accountants and Corporate Financial Professionals 2nd Edition
Peiser, Richard & Hamilton, David (2012) Professional Real Estate Development: The ULI Guide to the Business
Linneman, Peter (2010) Real Estate Finance & Investments: Risks and Opportunities
Clauss, J. Frances (2009) Corporate Financial Analysis with Microsoft Excel
Midgley, Kevin & Burns, G. Ronald (1979) Business Finance and the Capital Market
