This indicates that the Blackwell Automotive Company has generated 5.71 times more sales than the fixed assets. The higher the fixed turnover ratio the better for the company as it shows that the company is effectively utilizing its assets in generating the sales.
It is calculated by dividing the cost of goods sold by the average inventory. Average inventory is calculated by adding the beginning and ending inventory for Tootsie Roll Industries and dividing the sum by two. Inventory Turnover = Cost of Goods Sold Average Inventory = $340.9 million $66.3 million = 5.14 Tootsie Roll’s inventory turnover is 5.14. This means that five times during the year, Tootsie Roll had to replace its inventory. This is good because a high inventory turnover is better than a low one.
In other words, Berkshire can sell some of its debtor invoices(receivables) to a third party financial organization (factor).The transaction normally happens at a discount(advanced up to 80% in return for a commission and interest is charged for the amount advanced) in return for prompt cash, but with recourse of liability. If the original debtors do not pay, factor will not take the responsibility and the eventual liability will come back to Berkshire. Short Term Loans If the company faces financial deficit for a while then short term funding would be a good one. Short term loan is for less than a year to finance our short-term working capital needs. Banks might be willing to provide a short-term loans.
5) Discuss the debt to equity ratio and what it says about how Dollarama finances its operations? The debt to ratio is a ratio that compares a firms total liabilities and shareholders’ equity. It shows the proportion of the amount of money invested by the business owners as well as external entities. Debt to Equity Ratio = Total Liabilities/Shareholders’ Equity = $80,994/$931,490 = 0.087 The debt to equity ratio of Dollarama Inc. for the year of 2013 is 0.087. The debt to equity ratio is lower than one which means that the debt is less than the owner’s equity.
This was done with the help of a weighted average unlevered beta, the market risk premium and the risk free rate. The risk free rate of 5.85 % has been acquired from the 30 year T bond rates. The beta was found out using the three other comparable companies and their unleveraged betas. With help of all these values the discount rate of 10.847% was calculated which contributed in discounting the cash flows and obtaining the present value of cash flows. The continuing value for Calaveras has been estimated using the key value driver formula which was found out to be $ 7019.715.
Debt Ratio: The ratio is what percent of your monthly gross income is required for paying bills. The measure provides attentiveness to the leverage of the company, along with the possible risks the company faces in the relations of its debt leverage that American Airlines is carrying on its books. Thus, using the formula total debt over total asset gives the result for 2015 .88 and for 2014 .95. A debt ratio of more than 1 indicates that a company has more debt than assets. Also, a debt ratio of less than 1 indicates that a company has more assets than debt.
The cash ratio is the number of times that the company could meet its current obligations to its current cash balances. The higher the reserve ratio, the more likely a company will be able to pay its short-term debt. Shortly before failure, companies often have very low cash reserve ratio, low levels of inventories, receivables and relatively low current high ratios. Therefore, analyze that Bayou is lays on which position (Henderson et al.,
Business risk of GSAP they are going to buy: that it will not fail o Business risk= more business risk means more variability in operating profit which means a higher beta so adjust the Beta coefficient to match it with the level of financial risk incurred by the company. • Beta: Sterling’s proposed acquisition is 0.99 (beta is leveraged on the debt/equity ratio) [Exhibit 7] • Growth opportunities were limited and its business was under constant pressure • The company’s annual sales volume (in units) had increased by less than 1% per year, because of weak growth in overall demand and other company competition, which gives consumers the ability to choose other products • Business risk of buying at $265 million: relevantly low (where there
Do you wonder if debt management might be an answer for your issues? If you are able to pay off debt short-term via managing the current issue, you can pay less and become more financially secure in short period of time. Simply pick a company to work with that can get you better interest rates. Instead of a debt consolidation loan, consider paying off your credit cards using what's called the "snowball" tactic. Pick the creditor who charges the highest interest, and pay that debt down quickly.
This comparison Is used to indicate the period within which customers pay off their dues to the company. A low ratio indicates better performance since it implies that customers buy more of the inventory within a shorter period of time (Kimmel, Weygandt, & Kieso, 2016). A high figure implies that customers take long to buy hence inventory is held for longer periods before being bought. It is calculated as shown below: To calculate days in inventory, divide 365 days into the amount of annual cost of goods sold to arrive at sales per day, and then divide this figure into the total inventory for the extent period. Thus, the formula
Firms with excessive liabilities may run into severe trouble, even if they are otherwise successful entities. In finance, the term leverage refers to the ration between the firm 's liabilities and equity and is calculated by dividing total liability by shareholder equity. Note that some analysts prefer to use only long-term liabilities, which are payment obligations coming due in one year or more, when calculating leverage. The more common leverage formula, however, incorporates all liabilities. If stockholder equity is less than total liability, the firm 's leverage ratio will be greater than 1.
Operating margin/Return on sales (ROS) is the ratio of operating income divided by net sales or revenue, usually presented in percent. According to gurufocus’ statistics (October, 2015), Costco’s operating margins (3.12%) ranked higher than 53% of the 359 Companies in the Global Discount Stores industry (2.99%). Just like Gross Margin, it is important to see a company maintains its operating margin over time. Among the same industry, a company with higher operating margin is more efficient in its operation. It is also more stable during industry slowdown or recessions.