Financial Analysis - 2143 Words

Task: 3 A. Prepare a summary report in which you do the following: A1. Recommend a capital structure approach that maximizes shareholder return. Capital Structure: â€Å"Capital structure is the manner in which a firm’s assets are financed; that is, the right-hand side of the balance sheet. Capital structure is normally expressed as the percentage of each type of capital used by the firm debt, preferred stock, and common equity.† (Capital Structure Decision, 2002) Capital structure is a mix of debt, preferred stock, and common stock to which Competitive Bikes will plan to finance its company. The recommendation for Competition Bikes pertaining to their capital structure is the alternative of 50% Preferred and 50% Common Stock. With†¦show more content†¦It is compounded annual rate of return that the company will earn if it invests in the project and receives the given cash inflows.† (Gitman, 2008) Criteria for IRR: Ø If the IRR is greater than cost of capital, accept the project Ø If the IRR is less than cost of capital, reject the project Scenario one (low demand): 1. Total investment in the capital structure is $600,000 2. Depreciation based on 10 year life Building is expected to have $250,000 value at the end of ten years 3. Sales projections: Year 9 – 500 CarbonLite models Year 10 Year 11 – 1% growth year over year Year 12 and Year 13 – 2% growth year over year Cost of goods sold will increase proportionately 4. Selling and administrative anticipated expenses for Canadian operations: Year 9 : $250,000 Year 10 : $240,000 Year 11 : $230,000 Year 12 : $220,000 Year 15 : $210,000 Stabilization after year 5. 5. Competition Bikes requires a 10% hurdle rate to purse a capital investment. Based on NPV: I recommend declining this project of low demand with the NPV as a negative and according to the recommended criteria. My concern with scenario one is the NPV (net present value) after five year has a negative amount of - $39,281. With the slow growth of 1% in year 10 and year 11 and then increased by only 2% growth the last two years, has proven that these sales are not aggressive enough to helpShow MoreRelatedFinancial Statement Analysis : Financial Analysis1558 Words   |  7 Pagesyou hear the phase financial statement analysis, one wonders what is stands for. financial statement analysis is one of the most important part of any company to be successful. The reason companies rely on financial statements is for the company to come profitable even if the company is small or large. When companies use financial statement, it helps them to see if they are being profitable, by being used in different areas and reviewed by different departments. Chief Financial Officer an d other executivesRead MoreFinancial Statement Analysis : Financial Analysis759 Words   |  4 PagesWoolworth Financial Analysis Financial statement analysis assists a business entity, business shareholders and other people interested, to analyze the figures in financial statements to present them with superior information about such most important factors for decision making and ultimate business survival. As exemplified by Gibson (2001), income statement, balance sheet, and cash flow statements project the financial performance a company at the present and probably the future. According to theRead MoreFinancial Analysis1076 Words   |  5 PagesCango Financial CanGo Financial Analysis Report The success of a business depends on its ability to remain profitable over the long term, while being able to pay all its financial obligations and earning above average returns for its shareholders. This is made possible if the business is able to maximize on available opportunities and very efficiently and effectively use the resources it has to create maximum value for all involved stakeholders. One way the performance of a company can be measuredRead MoreFinancial Trend Analysis Of Tata Steel Ltd Essay1257 Words   |  6 Pages TERM PAPER ON â€Å"Financial Trend Analysis Of TATA STEEL Ltd.† BY SAMIKSH SHARMA {A3146915005} B.Com (H) – Evening Class of 2015-18 Under the Supervision of: Dr . ATUL KUMAR In Partial Fulfilment of the Requirements for the Degree of Bachelor of Commerce (Honours) At AMITY COLLEGE OF COMMERCE AND FINANCE AMITY UNIVERSITY UTTAR PRADESH, 2015-18 INDEX S.NO CONTENTS PAGE NO 1. TITLE PAGE 01 2. INDEX 02 3. DECLARATION FORM 03 4. ACKNOWLEDGEMENT 04 5. EXECUTIVE SUMMARY 05 - 06 6. INTRODUCTIONRead MoreFinancial Analysis of Lee College1527 Words   |  7 PagesFinancial Analysis of Lee College Not-for-profit organizations are required to produce financial statements that provide information about their financial position and performance. Lee College is a private, not-for-profit college that prepares its financial statements in accordance to the accounting standards of the National Association of College and University Business Officers (NACUBO). I will prepare a Statement of Activities, a Statement of Unrestricted Revenues, Expenses, and Other ChangesRead MoreFinancial Analysis2455 Words   |  10 PagesContents Executive Summary 3 Issues: 4 Recommendations: 4 Value of synergies and intrinsic value per share of Antarctica 5 Form of payment; Cash or common stock? 5 Share-for-share transaction 7 Term sheet and its components 8 Economic Analysis 8 Recommendation 9 Executive Summary In 1999, the CEO of Companhia Cervejaria Brahama (largest brewer in Brazil) was considering the bit for Antarctica (second largest brewer in Brazil). The purpose for this merger was to exploit the potentialRead MoreFinancial Analysis : Financial Information970 Words   |  4 PagesFinancial ratios make it easier for quantitative analysis, where financial information is analysed by investors, as the numerous numbers contained in a company financial statement can leave them confounded. There are five to six main types of financial ratios including liquidity measurement ratios, profitability indicator ratios, debt ratios, operating performance ratios and cash flow indicator ratios (Richard Loth, n.b and Jim Riley,n.b)1 and 2. However, these can be grouped into two principal categoryRead MoreFinancial Analysis2238 Words   |  9 Pagestimes | Apendix: Ratios of the Grand Hotel Financial analysis | | | Financial ratios are useful tool to analyze the firm performance and financial situation or to compare the firm’s financial situation with other. It will help managers or the board of director to make good decisions in their performance and future prospects. Financial ratios could be classified into five types: profitability, liquidity, financial leverage, asset turnover, and dividend policy ratios (PaulineRead MoreFinancial Analysis4661 Words   |  19 PagesFinal Project – Financial Analysis Beatrice Valdez, MBA Student Capella University MBA 6016 Finance and Value Creation [ May 16, 2012 ] Michael Blagg, Professor Table of Contents Executive Summary | | 3 | Historical Financial Statement Analysis: Financial Ratios | | 3-4 | Balance Sheet | | 4-6 | Income Statement | | 6 | Statement of Cash Flows | | 6 | Pro-Forma Financial Statements | | 7 | Balance Sheet Pro-Forma | | 7-8 | Income Statement Pro-Forma | | 9 | CashRead MoreFinancial Ratio Analysis : Financial Ratios Analysis1634 Words   |  7 Pages UNIVERSITY OF HOUSTON CLEAR-LAKE HADM 5233: FINANCIAL MANAGEMENT II ASSIGNMENT: FINANCIAL RATIO ANALYSIS UHCL Honesty Code â€Å"I will be honest in all my academic activities and will not tolerate dishonesty.† Uday Sekhar Reddy Mareddy