A high ratio generally means that the company has been aggressive in financing its growth with debt. Such capital structure is likely to result in volatility in the earnings as a result of additional interest expense. This can also said to be a measure of the gearing level of the company. The optimum level of gearing is different to specific business sectors. For example, capital intensive industries such as logistics tend to have a slightly higher long term debt/equity ratio while electronics manufacturing companies have a relatively lower ratio The company had a debt equity ratio of 2.44 in FY 2011.
This has placed SNC in a position to take on more leverage in the future, especially with its continuously growing interest coverage ratio. At the end of phase 3, SNC has a high interest coverage ratio of 105.88 due to the low level of interest expense, which steadily decreased from phase 1 to phase 3 . The improvement in interest coverage over the three phases shows investors that SNC is a creditable investment and shows SNC that they can take on more debt if needed. SNC is satisfied with its decision to switch to AT as its financier over MDM because of the long run potential benefits. Although SNC did not over draw its credit line or utilize the additional $500,000 on their credit line over the nine years, they have generated a cash surplus and enough value to meet their debt needs, as well as built a more stable and profitable company.
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
From 2003-2006, Six Flags had an average market cap of $602.3 million, under the rights offering, H Partners would essentially be buying the equity at a market cap of $644.7 million. This is an unreasonable investment as H Partners would likely be able to purchase equity cheaper on the open market, especially since companies that recently declared bankruptcy tend to have depressed returns as faith is restored. The only consideration that may make H Partners want to buy the equity is if failure to do so would prevent the proposal from being accepted. This would likely be the case if the other SFO holders did not want to cover the amount that H Partners would not be participating in. If this was the case, there are alternatives as H Partners may buy the equity and then sell it as cost, or sell the debt to another party interested in obtaining Six Flags
Momentum investors usually target companies with the largest price changes over the most recent months and the companies whose earnings are growing very quickly. At the first sign of a dip in the price of the stock, they usually sell. Most momentum investors are indifferent between long and short positions, they will go long or short on a stock provided they
Investors want a consistent growth rate in order to keep their money growing over the course of time. Earnings / Yield Earnings / yield give an indication of the yields realized on the market value of a share. The earnings / yield can be used to compare the earnings of a stock, sector or the whole market against bond yields. Sappi had inconsistent earnings / yield over the last 5 years with good yields in 2012 and 2010. However the earnings / yield which would interest investors most would be the most recent in 2013 when the earnings yield was negative 2.21.
Return on Equity ratio points at the company’s efficiency and earnings performance. In the case of Barry Callebaut, the Excel graph shows a slight fluctuation of the ratios in different years. According to Investopedia.com and Readyratios.com, the 12-20% is usually considered by analysts as a good investment quality, whereas Barry Callebaut is currently 0,36% below the lower threshold. Nevertheless, the ratio has been over 13% from 2013 till 1015, which shows that the company efficiently employs its
When government wants to spend more than it is capable of funding through taxation or borrowing, it simply issues money to finance its budget deficit. As money supply raises faster than the demand to hold it, spending raises and price raises as well. When the money is printed too much, the country’s currency almost becomes worthless and cases to do its job as a medium of exchange. It can have a damaging impact on real output and employment in that country. During hyperinflation, when amount of currency is printed so much, the price will shoot up, people begin to predict even more rapid inflation and normal economic relationships are
Basically the bottom line for Cintas is that they will have consistent earnings growth that will be a great accumulator for many years to come. Cintas has so much in holdings of marketable securities or investments and could be below market value and is a reason why they are able to invest and
(6) With earthquake resistant designs, buildings that are as expensive as these can almost be saved from the effects of an earthquake. At the very least, the damage that will be minimized, so that the costs or repairs and replacing expensive equipment, etc. would be reduced. Not only will the earthquake resistant buildings aid in reducing the costs of repairs and replacements, but they would also benefit people in other ways. When these systems are put into place, people would feel a lot safer in their homes or workplaces.