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Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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Compute the following performance indices for both companies:
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Profit margin
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Asset turnover
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Return on Capital Employed (ROCE)
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Current ratio
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Debt equity ratio
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Compare and analyse the performance of the two companies computed in (1) above and explain what the board of Box Limited needs to do to achieve their objective .
c. Which other non-financial measures can influence the decision of the board of Box Limited?
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- Indicate how the following items would generally be reported in the financial statements:1. Investment in subsidiary company2. Cost of engineering activity required to advance the design of a product to the manufacturing stage3. Lease prepayment4. Cost of equipment purchased5. Cost of searching for applications of new research findings 6. Cost incurred in the formation of a corporation7. Training costs incurred in start-up of new operation8. Purchase cost of a franchise9. Goodwill generated internally10. Cost of testing in search of product alternatives11. Goodwill acquired in the purchase of a business12. Cost of developing a patent13. Cost of purchasing a patent from an inventor 14. Legal costs incurred in securing a patent15. Unrecovered costs of a successful legal suit to protect the patent16. Cost of conceptual formulation of possible product alternatives17. Cost of purchasing a copyright18. Research and development costs19. Cost of developing a trademark20. Cost of purchasing a…When the account property, plant and equipment are presented in a statement as 20% of the total assets, this exemplifies: A profitability horizontal analysis C) efficiency D vertical analysisThe balance sheet of Alpha Ltd on 31/12/21 is the following ASSETS Plot of land Building Depreciation Vehicle Depreciation. Furniture Depreciation Participations Total fixed assets. Goods Goods in pledge Customers Downpayment to suppliers Prepaid expenses Available Funds Circulating Assets Total assets 31/12/2021 40.000 200.000 -40.000 80.000 -75.000 95.000 -72.000 85.000 313.000 60.000 20.000 30.000 20.000 20.000 107.000 257.000 570.000 31/12/2022 Liabilities Equity (stock price 3€) Statutory Reserves Premium Reserve New result Total Foreign Capitals Long term Loan Bills payable Suppliers Loan with pledged goods Customers' downpayments Expenses payables Prepaid revenues Total Predictions Total liabilities 31/12/2021 180.000 60.000 20.000 -30.000 230.000 120.000 40.000 50.000 14.000 20.000 30.000 20.000 294.000 46.000 570.000 During the use of 2022, the following transactions took place. Sale of goods with value EUR 80,000 and cost EUR 35,000, 80% of them paid by cash and the rest with…
- The income statement comparison for Rush Delivery Company shows the income statement for the current and prior year. A. Determine the operating income (loss) (dollars) for each year. B. Determine the operating income (percentage) for each year. C. The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the total assets amounts as the investment base, calculate the ROI. Was the decision to invest additional assets in the company successful? Explain. D. Assuming an 8% cost of capital, calculate the RI for each year. Explain how this compares to your findings in part C.Compute, Disaggregate, and Interpret RNOA of Competitors Halliburton and Schlumberger compete in the oil field services sector. Refer to the following 2018 financial data for the two companies to answer the requirements. $ millions HAL SLB Total revenue $23,995 $32,815 Pretax net nonoperating expense 653 426 Net income 1,657 2,177 Average operating assets 23,361 67,836 Average operating liabilities 5,888 16,499 Marginal tax rate 22% 19% Return on equity 18.56% 5.86% a. Compute return on net operating assets (RNOA) for each company.b. Disaggregate RNOA into net operating profit margin (NOPM) and net operating asset turnover (NOAT) for each company.Do not round until your final answer. Round answers to two decimal places (percentage example: 0.12345 = 12.35%). HAL SLB RNOA Answer Answer NOPM Answer Answer NOAT Answer AnswerInvestment PropertyDEF Company owns land and building being used for its operations and administrative functions. The land and building are carried in its books using the cost model and have the following data at January 1,2023.Land:Cost - P10,000,000Fair value - 14,000,000Building:Cost -P20,000,000Accumulated depreciation -13,500,000Fair value - 9,000,000On this date, the company vacated the old building and occupied a newly constructed one located in the commercial area of the Central Business District. The old building is then reclassified as investment property using the fair value model. The company uses the fair value model in all of its other investment property.What is the amount of fair value gain reported in profit/loss resulting from the reclassification from owner occupied to investments property due to change in use of the property? a. P0 b. P2,500,000 c. P4,000,000 d. P6,500,000
- Compute, Disaggregate, and Interpret RNOA of Competitors Halliburton and Schlumberger compete in the oil field services sector. Refer to the following 2018 financial data for the two companies to answer the requirements. $ millions HAL SLB Total revenue $24,679 $33,499 Pretax net nonoperating expense 1,337 1,110 Net income 2,341 2,861 Average operating assets 24,045 68,520 Average operating liabilities 6,572 17,183 Marginal tax rate 22% 19% Return on equity 18.56% 5.86% a. Compute return on net operating assets (RNOA) for each company. Note: 1. Select the appropriate numerator and denominator used to compute RNOA from the drop-down menu options. 2. Enter the numerator and denominator amounts to compute RNOA. Company Numerator Denominator RNOA Answer Answer HAL Answer Answer SLB Answer Answer b. Disaggregate RNOA into net operating profit margin (NOPM) and net operating asset turnover (NOAT) for each company. Note: 1. Select…They Company owns land and building classified as investment property . The land and building is being leased out under operating leases. The company uses cost model for its other investment property. Data relating to the land and building follows: Cost FV Dec. 31, 2020 FV Dec. 31, 2021 FV Dec. 31, 2021Land -------- P 10,000,000 -- P14,000,000 -------P15,500,000 ------- P 17,000,000Building ----- 20,000,000 --- 9,000,000 -------- 9,500,000 ------- 10,000,000 How much fair value gain should They company report in profit or loss for year 2021?note: uses cost modelThey Company owns land and building classified as investment property . The land and building is being leased out under operating leases. The company uses cost model for its other investment property. Data relating to the land and building follows: Cost FV Dec. 31, 2020 FV Dec. 31, 2021 FV Dec. 31, 2021Land -------- P 10,000,000 -- P14,000,000 -------P15,500,000 ------- P 17,000,000Building ----- 20,000,000 --- 9,000,000 -------- 9,500,000 ------- 10,000,000 How much fair value gain should They company report in profit or loss for year 2021?
- Revenue and costs for ABC Company for the year 2019 are presented below: • Revenue. . • G&G cost. $300,000 300,000 • Acquisition costs.. • Exploratory Dry holes.. • Successful exploratory holes. . 1,500,000 • Development wells, dry . • Development wells, successful . 400,000 • Production facilities.. • Production cost.. 1,000,000 2,000,000 500,000 350,000 50,000 Successful efforts Full cost • Amortization for 2019 $100,000 $200,000 • Accumulated DD&A 250,000 350,000 Required: 1- Prepare the income statement for ABC Oil Company for the year ended 2019 under the two accounting methods. 2- Show the difference explanation between the two accounting methods Net income/Loss.Ayayai Lorporation manuractures Dallet snoes and is in a perioa or sustainea growtn. In an errort to expana its proaucti on capacity to meet the increased demand for its products, the company recently made several acquisitions of plant and equipment. Tanya Mullinger, newly hired with the title Capital Asset Accountant, requested that Walter Kaster, Ayayai's controller, review the following transactions: Transaction 1 On June 1, 2023, Ayayai purchased equipment from Venghaus Corporation. Ayayai issued a $20,000, 4-year, non interest - bearing note to Venghaus for the new equipment. Ayayai will pay off the note in 4 equal instalments due at the end of each of the next 4 years. At the transaction date, the prevailing market interest rate for obligations of this nature was 8%. Freight costs of $300 and installation costs of $300 were incurred in completing this transaction. The new equipment qualifies for a $1,500 government grant. Transaction 2 On December 1, 2023, Ayayai purchased…Prior to finishing the final offer, Simpson's M&A team has a discussion with NPV Advisory. You were asked to provide a combined valuation for the new company based on the information below. ? Table 1. Simpsons 2017A 2018A 2019F stores local Sales (2 locations) 6.00 10.00 17.00 Operating Costs Operating Income -4.20 -6.60 -11.50 1.80 3.40 5.50 Depreciation and Amortization 1.00 1.20 1.50 EBITDA ? Net debt of the 20.00 company ? Table 2. RaTrade 2017A 2018A 2019F Sales (20 locations) 120.00 134.00 145.00 Operating Costs -90.00 -104.50 -111.70 Operating Income 30.00 29.50 33.30 Depreciation and 5.00 4.50 6.00 amortization EBITDA ? Net debt of the 56.00 company 1) What is the expected valuation of the Combined Company based on EBITDA ignoring all the discounts and premiums? 2) If the offer price by the Simpsons was $165M for 100% of equity, what is the upside for the buyer in dollars and as a percentage, if the new company will be valued at an international EV/EBITDA ratio of 6?