| Q. | Financial Management Ratios? | Related Search:
Other - Business & Finance | | | I currently have a financial management assignment that requires us to use 20 ratios and compare and contrast the results between two companies. (mine would be P&G and Kraft Foods)
I have found maybe half of the ratios and need help with the formulas for the remaining which are:
Borrowing Ratio
Long Term Debt to Equity Ratio
EBIT
Pre-Tax Margin
Cash turnover Ratio
Net Income per employee Ratio
Gross Profit Margin
If anyone could provide the formulas for these it would be greatly appreciated
| | A. | The problem relates to inter firm comparison.
Borrowing ratio is calculated as a percentage of total borrowings - short and long term - to equity
Long term debt to equity: Long term debts/ Long term debts + equity
EBIT is another term for operating profit. This is used to compare with turnover and also as a percentage of capital employed
Pre-tax margin:Profit before taxes/Turnover
Net Income per employee: Net Income/Number of employees
Gross Profit margin: Gross profit/turnover
I am not sure about cash turnover ratio, but I will get back to you later.
I would, however, suggest you to visit [Link]  where you will find an excellent tutorial on financial ratios
Please do not forget to study the basic requirements for an inter firm comparison and the limitations of ratio analysis. | | | |
| Q. | Is this good criteria for value investing? | Related Search:
Investing | | | First, let me just say that I'm 15. So before you go on making fun of me remember that Im only 15.
Ok, here are the criteria...
Low P/E Ratio (bottom 10% of sector)
PEG of less than one
Debt to Equity Ratio of less than one (To see that they're not in debt)
Price to Book Ratio of less than one
Around 6% - 12% average growth over past 5-6 years
Share price is 66% or less of intrinsic value (I calculate this with CURRENT assets minus TOTAL liabilities)
The ability to pay off total debt within one year (net income minus total liabilities)
Return On Equity of at least 17% for past five years
Return On Capital of at least 17% for past five years (Should be about the same as Return On Equity)
Pre-Tax profit margin being 20% more than industry average (average for past five years and I used pre-tax because of many companies are in different tax brackets which messes up the whole algorithm...)
Pre-Tax profit margin must also be at least 20% on top of the 1.2X above industry average criteria
Income per employee more that 10% than industry average (I think that this is a good indicator of good management)
A moderately (or widely) prevalent product/Brand name
Market cap over $1 billion (I don't know why, I just feel safer with relatively larger market caps)
Are these good criterion? I think they are, but I can't find any companies with such specifications... I guess I'll have to wait until comes along. Also, can someone explain "Free Cash Flow". I've heard this in a lot of places but I'm still confused about it... Thank you
| | A. | wow, those are great criteria - if you find this company, please let me know because I want a piece of it myself.
Good start - you have a plan, but remember that the business cycle and sector rotation are also very important. Also, you need to keep your eye on the markets and get a "feel" for what type of stocks are in favor. Lastly, a lot of investing is controlling emotion, not just numbers.
Free Cash flow is bascially the cash left over after a company has paid all its expenses and its capital expenditures (investments back into the business). Negative FCF is common in beginning, high growth companies as they are ploughing back capital into the business and is not necessarily a bad thing.
Cash Flow is the amount of cash a company generates from investments, operations, and financing. Cash outflows result from expenses and investments. It can be found in a company's financial statements and is reported over a given period. Remember that when calculating cash flow, non-cash expenses such as amortization are added back in to get the figure as these expenses do not actually result in true cash outlays. Unlike negative FCF, negative cash flow is usually not a good thing.
You have a very good start here, but it will be tough to find a company with such stringent criteria. I agree with the strategy of buying large cap companies and also buying the best in an industry or sector which seems to be your goal.
Great work - just keep on learning as much as you can. | | | |
| Q. | Dear Valued Employee: [Is this a rip, or what?]? | Related Search:
Other - Politics & Government | | | Isn't this the biggest rip you've seen??
Got this in the company mail today:
Dear Valued Employee:
As you know, President Obama has asked Congress to pass the beginning of his health insurance plan for all Americans. The starting plan will cost some $65 billion a year, of which the President has proposed $30 billion in higher taxes for firms doing business overseas, which is half our company's business. He asked Congress to find the rest of the money.
Congress has said the other $35 billion a year will come from disallowing corporate tax deductions for employee health insurance, as well as raising the general corporate income tax rate to 35%.
The company will absorb the higher taxes on our foreign operations and the tax increase to 35% even though we expect this to eliminate our currently low net income.
Our corporation pays approximately $6,000 per year per single employee and $9,000 per year per employee family for the health insurance coverage you presently have.
This means that Congress has decided to raise our taxes by $2100 per employee with single coverage and $3150 per employee with family coverage.
As you know, our company's sales have recently fallen by more than at any previous time in our company's history. Our company is paying no dividends to the owners and may soon be in danger of not earning the interest cost of our debts.
Accordingly, we must pass onto our employees the entire added tax that Congress will impose on your health insurance plan. It is either this, go out of business, or move operations and most jobs overseas.
Effective the first of next month, all US employees electing single coverage health insurance will have their monthly contribution increased by 175 dollars and those electing family coverage will contribute an added 262.50. For hourly employees paid every two weeks, this is $80.75 and $121.15 respectively.
Thank you for your continued efforts to make the company profitable,
Human Resources Department
| | A. | Your company appears to know the truth about Obama's healthcare reform and how it would affect employees now covered by insurance. You're very fortunate to be working for a company that sees a disaster in the making. | | | |
| Q. | Who out there with an income over $20K per month is struggling to make ends ? | Related Search:
Elections | | | I don't now if I'm missing something in Obama's tax plan, but if your personally making over $250 per year net by most any ones standards your doing well. $250K a year comes out to $20,833.00 per month
Even a small business that has covered all of it's payroll and expenses that comes out with $250 in net profit is still doing ok-
I don't understand the level of middle class resistance to Obama's tax plan, I'm I missing something?
---I am a small biz owner and have about 12 employee's---
@ The Village Atheist
Your post expense net profit is taxed
and I have few part time and a seasonal employees
But you did a Sara Palin and didn’t answer the question
@ besgwineboogie
How will it devastate small business?
I'm set up as Corp not a flow through so I take a wage and a distribution from the business- In up years we make sure to keep our expenses high enough that we're not showing big profits on paper because it rapped by the government any way, so it's better for us to spend it on growth than get taxed it-
@ kerfitz
I don't disagree with you I personally support a flat tax-
In terms of handing over money to the government, I would rather pay it out in bonuses to our staff-
But at this there has be some kind tax revision because of the amount of debt the country is in and our infrastructure needs to be updated… Both will take money to fix and it has to come from somewhere-
| | A. | OK volunteer your profits to the goverment. Why haven't you already? seriously... Just because someone is doing "OK" doesn't give the goverment the right to take it from them and give it to people that haven't done the work necessary to do "OK". Today it is 250K and if that isn't enough then tomorrow they say that people that make 150K are doing "OK" and can pay more too... then next week they say anyone making 75K is making more than enough.... I guess you really don't know anyone that makes that much (not that I do) but there is an altruism that states the more you make the more you spend. 20K a month isn't all that much when you're making payments on a 2.4M home (the going rate in CA for a two bedroom condo)
Edit: I commend you for giving bonuses to to your employees. This is the way the "Trickle down" economy is supposed to work... you as a business owner have more money in your pocket and share some of that with your employees. The money for infrastructure and things does need to come from somewhere. I too would like to see a flat tax or even a national sales tax instead of an income tax. Income taxes do not promote savings and investing. | | | |
| Q. | Business Income/Loss question...? | Related Search:
United States | | | I had a licensed gourmet food delivery company since 7/2000 that I used loans against a trust to set up and buy equipment. I had a warehouse and 7 vehicles in addition to product. I subleased my trucks to the salesmen so I didnt have any employees and ran the business 6 days per week myself...
I didnt do any accounting for years but have all the reciepts and legit expenses. I hired a woman to complete my tax returns on my 3rd year in business and she discovered that I wasnt actually making any money. In fact, despite 60K per month in sales, I lost money every month of each year and survived on cash flow and advances from the trust account.
I have never filed tax returns but have all records. Now, I work as an employee and have taxes withheld from my check.
I need to "close" the business. If I show zero net income and only use enough receipts to make this happen, can I deduct losses in 2006 against my income from 2006?
The woman is a professional bookkeeper that I hired to prepare the documents for doing tax returns.
I understood if you have no tax liability that you do not need to file.
I am German - not American - so not real sure of how to do USA taxes. I also have some trouble with reading and understanding all the tax code books since German is my first language.
| | A. | I would lean towards.......maybe.
The problem is that (usually) having losses every year for six years means that you have a "hobby" and not a "business" and hobby losses are not deductable. I IRS may have trouble believing that someone was losing money for years without knowing it.
Here are some items from IRS.gov on hobby vs. business:
You carry on the activity in a business-like manner,
The time and effort you put into the activity indicate you intend to make it profitable,
You depend on income from the activity for your livelihood,
Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business),
You change your methods of operation in an attempt to improve profitability,
You, or your advisors, have the knowledge needed to carry on the activity as a successful business,
You were successful in making a profit in similar activities in the past,
The activity makes a profit in some years and the amount of profit it makes, and
You can expect to make a future profit from the appreciation of the assets used in the activity.
The fact that you never claimed any business losses in the past (2000-2005) I think would tip the scale to "hobby" and not business and the 2006 "losses" would not be deductable. | | | |
| Q. | How is it possible for one to survive off of just $9.00 per hour alone even with full time employment? | Related Search:
Economics | | | Especially when you're employed at places like Wal-Mart who tend not to let employee's work overtime hours.
It seems one has to either have a roommate and/or have a significant other who also provides a source of income for the household in order to survive and, live at least somewhat comfortably.
I personally do not like having roommates so I prefer to live on my own and, not have to worry about some idiot roommate not paying their part of the bills which could potentially ruin my credit. Also, do you think the hardship of the U.S. economy is one of the many sources to hasty and failed marriages? I think it maybe a factor for some who get married and/or get into relationship where the couple lives together for financial convenience which most of the time leads to a failed relationship filled with after problems in many cases financial hardship and, irresponsibility.
I also almost forgot to mention that the only real affordable housing is based on income which I was turned down by a based on income apartment because I make too much money. Which I mentioned I make $9.00 per hour with 40 hours per week. And the cheapest I can find per month outside of that is $650.00 per month. If you add in the cost of food; utilities, gas and, certain leisure's like basic cable television, it all exceeds my net income.
I live in Michigan by the way.
Also, the area I live in has no public transportation like a lot of typical mid sized towns.
| | A. | Short answer: you can't.
Bottom line: You are not supposed to.
You have to take full responsibility for yourself. The wage you are paid is the price of your productivity. If you are doing a job that does not require any specialized skills you will not make much money. Therefore, you have to work multiple jobs in order to make enough to get by. Over time, you build up a skill set that is worth more to employers. As you do that, you should build up your savings so that you can afford more things
You are making decisions for your self about things from roommates to cable tv to only working one job that put you in a more uncomfortable position than you can afford. When you make as little as you do, roommates are a reality, not an option; TV itself is a luxury, cable is out of the question; working one job is completely insufficient, at least two are a necessity. Follow the examples of people who really make it work. Adam Shepard has an excellent book: Scratch Beginnings: Me, $25, and the Search for the American Dream. He outlines the strategy he followed in an effort to refute the nay sayers out there like Barbara Ehrenreich who students are constantly forced to read in high school and college. Guess what... IT CAN BE DONE.
If you set goals for yourself and follow a strategy that actually is focused on success rather than constant reminders of why you could fail, you can do it.
As to your point on divorces:
Yes, it plays a role. However, it is likely to push already shaky relationships over the edge. Living together or getting married for financial convenience is #1 illogical and #2 a terrible reason to live together or get married. Just as you said, the inevitable separation resulting from such a poor foundation is expensive and will likely ruin your credit. Divorces cost more money than the couple will save over the short time they are married and leaving one individual with all of the bills and rent of a shared apartment will ruin their credit or force them into bankruptcy. | | | |
| Q. | Accounting Income Statement? | Related Search:
Other - Business & Finance | | | Here is the case I am working on:
Woody Allen Corp. is an entertainment firm that derives approximately
30% of its income from the Casino Royale Division, which manages gambling facilities. As auditor
for Woody Allen Corp., you have recently overheard the following discussion between the controller
and financial vice-president.
VICE-PRESIDENT: If we sell the Casino Royale Division, it seems ridiculous to segregate the results
of the sale in the income statement. Separate categories tend to be absurd and
confusing to the stockholders. I believe that we should simply report the gain on
the sale as other income or expense without detail.
CONTROLLER: Professional pronouncements would require that we disclose this information
separately in the income statement. If a sale of this type is considered unusual and
infrequent, it must be reported as an extraordinary item.
VICE-PRESIDENT: What about the walkout we had last month when employees were upset about
their commission income? Would this situation not also be an extraordinary item?
CONTROLLER: I am not sure whether this item would be reported as extraordinary or not.
VICE-PRESIDENT: Oh well, it doesn’t make any difference because the net effect of all these items is
immaterial, so no disclosure is necessary.
(a) On the basis of the foregoing discussion, answer the following questions: Who is correct about
handling the sale? What would be the income statement presentation for the sale of the Casino
Royale Division?
(b) How should the walkout by the employees be reported?
(c) What do you think about the vice-president’s observation on materiality?
(d) What are the earnings per share implications of these topics?
a. I said the controller was correct, but I didn't think this sale was an extraordinary item, but discontinuing operations. So I am not sure if this was right.
B. I said that it is not extraordinary or unusual, but something that occurs in the ordinary course of a business.
C. Not sure if it is material or immaterial.
D.Not sure, I know net income is less because Casino Royale represented 30% of Woody Allen Corp's income.
| | A. | Your logic is right! - Personal statements of feelings are not rightful items for inclusion in financial statements & balance & cash flow statements. As an accountant you deal directly with the consequences of all monetary decisions made by company. Net effect of a sale of 30% part of company is calculable, and must be part of a profit project. | | | |
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