Asset liability management Essays

Case Study 1: Banc One Corporation Asset and Liability Management Gizem Akkan So basically, the main problem Banc One Corporation has falling share prices as it is written from a 48 ¾ to 36 ¾ in April 1993. The basic reason behind this decline is that its exposure to derivative securities. This decline in share prices raises concerns among the Banc One’s Investors as well as its analysts since they are uncomfortable with huge amount of derivative usage particularly swaps. They think they are

Answers for Candy a) Type of information each financial statement provides • Balance sheet Balance sheet reported assets, liabilities and stockholders' equity. Assets represent all the elements that a company owns and uses to generate revenue. Liabilities include money owed to creditors of assets or other financing purposes. The assets include investments made in the business or the capital invested by the owners (Collier, 2015). • Income statement The income statement reports the profit of the

and where items belong on a balance sheet, they will better understand the state that the business is in. “It provides you with a picture of the financial health of your practice or organization on a certain date.” (Arnow & Xakellis, 2001). Assets An asset is any item or property that can be considered to have value, owned by a person or business, in this case we will deal with that of the health care business area. “Cash, accounts receivable, notes receivable, and inventory are

Capital lease equipment recorded as an asset, depreciation, and books. Because is to pay on the loan, payment record for the account of overall loan time limit. Operating lease record for operating expenses, no relevant expenses. In the review, in a capital lease, the equipment has been booked and the corresponding assets, long-term liabilities and operating leases, it is recorded as expenses. Lease equipment advantage, most enterprises, do one of two ways, either through the financing lease or

owner of asset, estimation of fair value by a market price obtained from the active market, well informed and competitive market. According to Betakova, J;Hrazdilova Bockova, K.& Skoda,M., they also agree that FVA can increase transparency of a firm and fair value information is useful for investors in making decisions, for contractor and lenders to have better

McDonald Corporation’s average return on total assets is 14.97% during the 3-year period, with slight decrease in 2013 and notable decrease in 2014. The gross margin remains stable and the average is 66.20%. The average profit margin ratio is 28.39%, with a sharp decline from 29.38% to 26.19% respectively. These two ratios reflect the profitability of McDonald’s. The figures indicate that McDonald’s Corporation’s ability of making profits out of assets is weakening, but it still remains at a high level

due by using the company's current or quick assets, • Current ratio= current assets current liabilities AVP= 1.34 ULTA= 2.9 REVLON= 15.86 • Quick ratio = ( current assets - inventory) current liabilities AVON= .94 ULTA= 1.12 REVLON= 15.26 The safe rate for current ratio is 1 or up, that means the current assets can cover the current liabilities, we see that the current ratio for AVP is 1.34 which means it is it has ability to cover the current liabilities once they become due. Quick ratio refers to

Corporation; an American energy and commodities trading company. At its peak, the company operated on annual revenues in excess of $100 billion and was the source of employment for more than 20,000 people. Enron’s collapse was primarily rooted in poor management and its negligence in sound accounting practises. Enron was a solely profit-driven company that disregarded other business indicators as a result of poor corporate governance and internal controls. In pursuit of appeasing shareholders, Enron created

lot of cash trade. Due to this reason, it is a possibility that their current assets ratio of less than 2 : 1. This is not likely to be an issue for them because sufficient amounts of cash is probably collected daily through the checkouts. On the other hand, the airline industry, a low current ratio may not necessarily mean that a company is in peril. Reason being is that a large portion of the high current liabilities may relate to the pre-purchased tickets, which the airline can honour for a relatively

examine the liquidity of the business by equating the amount of current assets to current liabilities. Although current ratio fluctuates from industry to industry, is preferred to have at least one dollar of current assets for every dollar of current liabilities. Kohl's has the advantage over J.C Penney, as Kohl's current ratio is 1.87 in comparison to J.C. Penney?s ratio of 1.67. Kohl?s Corporation can pay all of its current liability and still have a positive working capital better than J.C.

1) a. current liability: Money that a business owner must pay to a creditor within 12 months of the balance sheet date is a current liability. Ideally, short-term assets, such as cash and accounts receivable, should more than offset short-term liabilities, such as accounts payable, notes payable and payroll. If they do, the company 's short-term liquidity position is positive, which suggests the company will likely meet its cash-flow needs and remain a going concern. It is wise for a business owner

cost that is fixed i.e. purchasing cost. Fair cost is the cost on which the assets can be sold or exchanged among the different parties and the liabilities can also be settled with the other parties while the historical cost of an asset is that cost on which that particular asset was purchased. The fair value of an asset can be determined from the current situation of the market because it is the market value of the asset while the historical cost is always fixed; it can’t be changed with the passage

Liquidity ratio • Current ratio: • Quick ratio Current ratio=current assets/current liabilities Current ratio 2001 2000 A-Tech 1.16 0.95 Bi-Sci 2.25 2.17 Quick ratio=current assets –inventories/current liabilities Quick ratio 2001 2000 A-Tech 0.57 0.45 Bi-Sci 1 0.92 Interpretation: Current ratio is the ratio in which current assets divided by current liabilities. Bi-Sci Company has more liquidity as compared to A-tech Company. Activity ratio: Receivable turnover=credit sales/receivables Receivable

and average acid test ratio is 2.2. Therefore, Cracker Barrel has enough current assets to cover their liquidity ratio, so they are providing themselves an excellent financial stability. Above all, the current ratio and acid test ratio includes immediate access to convert to cash. On the other hand, Cheesecake Factory has a financially stronger company with a greater amount of current ratio to cover their liabilities. Working Capital The working capital is the money

shareholders in exchange for stock, is derived from the difference between the total assets and total liabilities ($350,000-$161,500= $188,500). R. The total Liabilities and Stockholder equity is the sum of the total liabilities and total stockholders equity ($161,500+$188,500 = $350,000) Conclusion: Polly’s Pet Products is a successful business as Polly’s Pet Products Assets is equivalent to its total liabilities and stockholder equity, there is a zero balance. This also explains that the above calculations

Automotive Inc. can pay off more of its current debt than AutoZone can. O’Reilly also has more liquid assets to cover its liabilities than AutoZone which is why O’Reilly’s quick ratio is larger. Both companies have a small cash ratio, but AutoZone has more cash to cover its short term debt. Both companies also have a negative NWC to Total Assets Ratio, which means that they have too many current liabilities, which in turn reduces the amount of working capital available. However, O’Reilly is also in a better

when it comes due. Under asset management efficiency ratios, we look at total assets turnover and fixed asset turnover. Total assets turnover: Modern Technology’s dropped slightly from year 2014 to year 2015. However, Modern Technology is able to use its assets efficiently to generate sales because it is a positive ratio. Fixed asset turnover: Modern Technology’s fixed asset turnover ratio improved from year 2014 to year 2015. This could imply that the increase in fixed assets consisting of net plant

much current asset one firm has against its one dollar worth of current liabilities. It shows us how efficiently and quickly one firm can convert its assets into cash paying the short term liabilities. From the table, we can see that at the year of 2017 RAK Ceramics Ltd. has a current ratio of 1.97. Current ratio shows us how much current assets the firm has against its current liabilities. However, too much current ratio means there’s is idle assets available and the use of assets is inefficient

The Current ratio is primarily used to give an idea of the company's ability to pay back its short-term liabilities by using its short-term assets. If a company’s ratio is higher than 1 then the company is more capable of paying its obligations. However if the companies ratio is under 1 then that suggests that the company would be unable to pay off its obligations in under 12 months. Publix’s ratio shows that they are a company that is in good financial health and can quickly repay debts owed. Companies

Identify resources to obtain start-up capital. Introduction - Handy financial terms Accounts payable A current liability representing the amount owed by a business to a creditor for the merchandise or the services purchased on open account, i.e. Without giving a note or other evidence of debt. Accounts receivable Money owed to a business enterprise for merchandise bought on open account. Asset Anything owned by an individual or business that has commercial or exchange