As a financial manager, one of your primary responsibilities will be managing the cash flow of the business. This involves ensuring that the company has enough cash on hand to meet its financial obligations and maintain operations.
To do this, you will need to monitor and project cash inflows and outflows, create and manage a cash budget, and make strategic decisions about when and how to invest excess cash.
Additionally, you may need to negotiate with lenders or investors to secure financing or manage debt, as well as implement policies and procedures to prevent fraud or misuse of funds.
Effective cash management is critical to the success of any business, as it enables the company to meet its financial obligations, pursue growth opportunities, and maintain financial stability.
By carefully managing the company's cash flow, a financial manager can help ensure the long-term success of the business.
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ABC Exports Ltd. was struggling to receive payments from importers in time as required by them. Their management decided to implement strict and harder accounts receivables management policy, which of the following will not take place: A. Faster accounts payables than before B. Increase in bad debt expense C. Increase in the cost of cash discounts D. b & c only E. a & b only
The correct answer is E. a & b only. Implementing a stricter accounts receivables management policy should result in faster accounts payables than before, as the company would be better able to manage their cash flow and pay their own bills on time.
However, increasing the stringency of the policy may also result in an increase in bad debt expense, as some customers may not be able to meet the new requirements and default on their payments.
There should not be an increase in the cost of cash discounts, as the policy should help the company better manage their cash flow and offer discounts more selectively.
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Accounts payable is a liability and represents the amount of money that a company owes to its suppliers or vendors for goods or services received on credit. The Correct option is E
However, increasing the stringency of the policy may also result in an increase in bad debt expense, as some customers may not be able to meet the new requirements and default on their payments.
There should not be an increase in the cost of cash discounts, as the policy should help the company better manage their cash flow and offer discounts more selectively.
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he trial balance will include a.only the credits of each account. b.only balance sheet accounts. c.the ending balance of each account. d.only the debits of each account.
The trial balance includes the ending balance of each account and serves as a tool to ensure that the accounting records are accurate.The correct answer to your question is c.
The trial balance will include the ending balance of each account. A trial balance is a summary of all the account balances in the general ledger at the end of a particular accounting period. It is used to ensure that the total debits and total credits are equal and that the accounting records are accurate. When preparing a trial balance, both the debit and credit balances of each account are listed separately.
The trial balance includes all accounts in the general ledger, including both balance sheet accounts (such as assets, liabilities, and equity) and income statement accounts (such as revenues and expenses). The purpose of the trial balance is to identify any errors in the accounting records.
If the total debits and credits are not equal, there is an error that needs to be corrected. The trial balance helps to ensure that the financial statements accurately reflect the company's financial position and performance. The correct answer to your question is c.
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a familiar example of an agent is a: group of answer choices gardener hired to maintain the grounds at a large industrial complex. corporate officer who serves in a representative capacity for the owners of the corporation. no answer text provided. janitorial employee who does not deal with third parties.
The correct answer is option (A) A familiar example of an agent is a: Gardener hired to maintain the grounds at a large industrial complex.
A person who acts on behalf of another person or thing, known as the principal, is known as an agent.
The agent has been granted permission to carry out specific tasks for the principal, including decision-making, the purchase and sale of products, and the rendering of services. Agents might be people, businesses, or other types of entities.
The gardener in this illustration is a representative of the industrial complex. The complex hires a gardener to take care of the grounds, and the gardener is given permission to operate in particular ways on the complex's behalf.
Among other things, the gardener may be in charge of mowing the grass, pruning the hedges, and planting flowers.The gardener may be held accountable for any losses or damages as a result of their conduct and is required to behave in the complex's best interests.
Complete Question:
A familiar example of an agent is a:
Group of answer choices
(A) Gardener hired to maintain the grounds at a large industrial complex
(B) Corporate officer who serves in a representative capacity for the owners of the corporation
(C) Janitorial employee who interacts with third parties
(D) Janitorial employee who does not deal with third parties
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T/F the company's bank reconciliation is a critical means by which an auditor completes audit procedures over the cash balance in the financial statements.
The statement "The company's bank reconciliation is a critical means by which an auditor completes audit procedures over the cash balance in the financial statements" is true. Bank reconciliations are an essential part of the audit process as they help auditors verify the accuracy of a company's cash balance in the financial statements.
A bank reconciliation involves comparing the company's internal records of cash transactions and balances with the corresponding information provided by the bank. This process helps identify any discrepancies between the two sets of records, such as timing differences, errors, or potential fraud.
1. Obtain the company's cash records and bank statements for the period being audited.
2. Compare the beginning and ending balances in the company's cash records to the corresponding balances on the bank statements.
3. Identify any outstanding deposits, checks, or other transactions that have been recorded by the company but not yet reflected in the bank statement.
4. Adjust the company's cash records for any errors or omissions discovered during the reconciliation process.
5. Confirm that the adjusted cash balance in the company's records agrees with the adjusted bank balance.
By completing a thorough bank reconciliation, the auditor can gain assurance that the company's cash balance is fairly stated in the financial statements. This process not only helps to detect errors or fraud but also strengthens the overall reliability of the financial reporting.
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1. short discussion on the marketing strategies, demand andprojected sales of smart dc stand fan.2. short description on production requirements, quality controlproduction cost of smart dc stand fa
When it comes to marketing strategies for the smart DC stand fan, it's important to first identify the target market.
This type of fan would likely appeal to those who prioritize energy efficiency and technology in their home appliances. One strategy could be to promote the fan's energy-saving capabilities and convenient features (such as remote control and programmable settings) through social media and targeted online ads. Another strategy could be to partner with sustainable living organizations or influencers to promote the fan as a green option for cooling.
In terms of demand and projected sales, it would depend on factors such as pricing, competition, and overall consumer interest. Market research and testing would be necessary to determine the potential success of the product. In terms of production requirements, the smart DC stand fan would require materials for the fan blades, motor, housing, and electronics (such as the remote control). Quality control would be important to ensure the fan meets safety and performance standards, as well as customer expectations.
Production costs would depend on factors such as the cost of materials, labor, and overhead expenses. Implementing efficient production processes and minimizing waste would also be important for reducing costs.
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blake is a manager at a sporting goods store and needs to fill an open position for an assistant manager. austin works in the store as a sales associate and blake thinks he would be perfect for the job. why might blake be hesitant about promoting austin and giving him the job?
The reasons why Blake is hesitant towards the promotion of Austin and providing him with the job are
Blake might think that Austin still lacks experience in the line of work following this thought Blake might be hesitant cause if he did promote Austin it will bring resentment among other employees who in comparison have stayed longer than Austin in the company. There could be another possibility that Blake considers Austin important and valuable concerning his current role working as a sales associate, promoting Austin now will only hamper his current position.From the above reasons, it is clear why Blake is reluctant in providing a promotion to Austin.
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2. a)
Dungeoness Corporation has excess cash of $3,000 that it would like to distribute to shareholders as an extra dividend. Current earnings are $0.80 per share, and the stock currently sells for $31 per share. There are 260 shares outstanding. Ignore taxes and other imperfections.
If Dungeoness Corp. pays a cash dividend, what will be the dividend per share? After the dividend is paid, what will the price per share be? What are earnings per share (EPS) and the price earnings (P/E) ratio? Enter your answers rounded to 2 DECIMAL PLACES.
Dividend per share=
Price per share =
Earnings per share (EPS) =
Price earnings (P/E) ratio=
The dividend per share is calculated by dividing the excess cash by the number of outstanding shares:
Dividend per share = $3,000 / 260 = $11.54
After the dividend is paid, the price per share will be adjusted downward by the amount of the dividend, which is $11.54:
Price per share = $31 - $11.54 = $19.46
The earnings per share can be calculated by dividing the current earnings by the number of outstanding shares:
EPS = $0.80 / 260 = $0.0031
The price earnings ratio is calculated by dividing the price per share by the earnings per share:
P/E ratio = $19.46 / $0.0031 = 6,277.42 (rounded to 2 decimal places)
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2000 2001 2002
Current Assets
Cash 20,000 21,000 24,000
Short term Investment 60,000 81,000 145,000
A/R 100,000 90,000 140,000
Inventories 14,000 17,000 15,000
Prepaid Exp 13,000 12,000 14,000
Total Current Assets 207,000 221,000 338,000
Investment 43,000 35,000 40,000
Property and Equipment
Land 68,500 68,500 68,500
Building 810,000 850,000 880,000
Furniture and Equipment 170,000 190,000 208,000
1,048,500 1,108,500 1,156,500
Less: Accumulated Depreciation 260,000 320,000 381,000
Other Operationg Equipment 11,500 20,500 22,800
Total Assets 1,050,000 1,065,000 1,176,300
Current Liabilities
Accounts Payable 60,000 53,500 71,000
Accrued Income Taxes 30,000 32,000 34,000
Accured Expenses 70,000 85,200 85,000
Current Portion of Long-term debt 25,000 21,500 24,000
Total Current Liabilities 185,000 192,200 214,000
Long-term Debt
Mortgage Payable 425,000 410,000 400,000
Deferred Income Taxes 40,000 42,800 45,000
Total Long-term Debt 465,000 452,800 445,000
Total Liabilities 650,000 645,000 659,000
Owner's Equity
Common Stock 55,000 55,000 55,000
Paid-in Capital in Excess 110,000 110,000 110,000
Retained Earnings 235,000 255,000 352,300
Total Owner's Equity 400,000 420,000 517,300
Total Liabilities and Equity 1,050,000 1,065,000 1,176,300
1) Amount Change and % change from Year 2000 to Year2001
2) Current ratio, Acid Test Ratio, A/R turn-over, Avg collection period, Solvency Ratio, profit ratio for Year2001)
( Assume the 2002 Revenue 1,300,000, profit is 65,000 ) Operating Cash flow is 201,000.
1)From 2000 to 2001, the company's total assets increased by $15,000 or 1.43%. The total current assets increased by $14,000 or 6.76%, with short-term investments showing the largest increase. The accounts receivable decreased by $10,000 or 10%, while inventories increased by $3,000 or 21.4%. The company's total liabilities increased by $5,000 or 0.77%, with current liabilities showing the largest increase. The owner's equity increased by $20,000 or 5%.
2)Current Ratio = $221,000 / $192,200 = 1.15
Acid Test Ratio = 1.16
Accounts Receivable Turnover = 13.68 times
Average Collection Period = 26.67 days
Solvency Ratio = 1.65
Profit Ratio = 0.05 or 5%
1)Amount Change and % change from Year 2000 to Year 2001:
Current Assets:
Cash: +$1,000 (+5%),
Short-term Investments: +$21,000 (+35%),
Accounts Receivable: -$10,000 (-10%),
Inventories: +$3,000 (+21%),
Prepaid Expenses: -$1,000 (-8%)
Total Current Assets: +$14,000 (+7%)
Investments: -$8,000 (-19%)
Property and Equipment:
Land: No change,
Building: +$40,000 (+5%),
Furniture and Equipment: +$20,000 (+12%)
Total Property and Equipment: +$60,000 (+6%)
Accumulated Depreciation: +$60,000 (+23%)
Other Operating Equipment: +$9,000 (+78%)
Total Assets: +$15,000 (+1.4%)
Current Liabilities:
Accounts Payable: -$6,500 (-11%),
Accrued Income Taxes: +$2,000 (+7%),
Accrued Expenses: +$15,200 (+22%),
Current Portion of Long-term Debt: -$3,500 (-14%)
Total Current Liabilities: +$9,200 (+5%)
Long-term Debt: -$12,200 (-3%)
Total Liabilities: -$5,000 (-0.8%)
Owner's Equity:
Common Stock: No change,
Paid-in Capital in Excess: No change,
Retained Earnings: +$20,000 (+9.6%)
Total Owner's Equity: +$20,000 (+5%)
Total Liabilities and Equity: +$15,000 (+1.4%)
2)Ratios for Year 2001:
Current Ratio = Current Assets / Current Liabilities = $221,000 / $192,200 = 1.15
Acid Test Ratio = (Cash + Short-term Investments + Accounts Receivable) / Current Liabilities = ($21,000 + $145,000 + $90,000) / $192,200 = 1.16
Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable = Net Sales / [(Beginning Accounts Receivable + Ending Accounts Receivable) / 2] = $1,300,000 / (($100,000 + $90,000) / 2) = 13.68 times
Average Collection Period = 365 days / Accounts Receivable Turnover = 365 / 13.68 = 26.67 days
Solvency Ratio = Total Assets / Total Liabilities = $1,065,000 / $645,000 = 1.65
Profit Ratio = Net Income / Net Sales = $65,000 / $1,300,000 = 0.05 or 5%
Operating Cash Flow is not needed to calculate these ratios.
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Consider a 30-year, fixed-rate mortgage for $125,000 at a nominal rate of 6% with monthly payments. If the borrower pays an additional $120 with each monthly payment, what will be the amount of the last monthly payment?
A. $872.00
B. $357.03
C. $869.44
D. $420.90
E. $873.79
F. $357.77
G. $418.81
H. $355.99
We can calculate the last monthly payment by subtracting the balance from the monthly payment, which gives us $869.16 - $79,572.42 * 0.005 = $420.90. Therefore, the answer is option D, $420.90.
To solve this problem, we need to first calculate the monthly payment for the mortgage. We can use the formula PMT = PV*r/(1-(1+r)^(-n)), where PV is the present value (the mortgage amount), r is the monthly interest rate (6%/12 = 0.005), and n is the total number of payments (30*12 = 360). Plugging in the values, we get a monthly payment of $749.16.
Next, we need to add an additional $120 to each monthly payment. Therefore, the new monthly payment will be $749.16 + $120 = $869.16.
Now, we can use the formula for the remaining balance of a mortgage to calculate the amount of the last monthly payment.
The formula is Balance = PV*(1+r)^n - PMT*[(1+r)^n-1]/r, where n is the number of remaining payments. Since this is a 30-year mortgage with monthly payments, the number of remaining payments will be 360 - 1 = 359. Plugging in the values, we get a balance of $79,572.42.
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Define what is meant by basis. State three situations that couldresult in non-zero basis at maturity.
A non-zero basis at maturity in finance refers to the difference between the spot price and the futures price of an asset, and it can occur due to supply and demand imbalances, transportation costs, or changes in interest rates.
What is definition and causes of non-zero basis at maturity in finance?In finance, the term "basis" refers to the difference between the spot price of an asset and the futures price of the same asset. This difference is usually expressed as a percentage or a dollar amount.
A non-zero basis at maturity occurs when the spot price of the asset and the futures price of the same asset are not equal when the futures contract expires. Here are three situations that could result in a non-zero basis at maturity:
Supply and demand imbalances: If there is a shortage of a particular commodity, the spot price may be higher than the futures price. Conversely, if there is an oversupply of the commodity, the spot price may be lower than the futures price. These imbalances can result in a non-zero basis at maturity.Transportation costs: If the cost of transporting a commodity from the spot market to the delivery location specified in the futures contract is higher than expected, the spot price may be higher than the futures price. This can result in a non-zero basis at maturity.Interest rates: If interest rates rise during the term of a futures contract, the futures price may be lower than the expected spot price at maturity. This is because the cost of carrying the commodity over the term of the contract is higher when interest rates are high. This can result in a non-zero basis at maturity.Learn more about non-zero basis.
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A 20-year maturity bond with face value of $1,000 makes annual coupon payments and has a coupon rate of 9.7%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places.) a. What is the bond's yield to maturity if the bond is selling for $1,070? Yield to maturity __% b. What is the bond's yield to maturity if the bond is selling for $1,000? Yield to maturity __ % c. What is the bond's yield to maturity if the bond is selling for $1,270? Yield to maturity __ %
a. The bond's yield to maturity is 8.000%. b. The bond's yield to maturity is 9.700%. c. The bond's yield to maturity is 6.316%.
a. To calculate the bond's yield to maturity when it is selling for $1,070, we need to solve for the interest rate (yield) that equates the present value of the bond's future cash flows (coupons and principal) to its current price.
Using a financial calculator or spreadsheet, we can enter the following values into the appropriate formula:
N = 20 (number of years)
I/Y = ? (yield to maturity)
PMT = $97 (annual coupon payment, which is 9.7% of the face value)
FV = $1,000 (face value)
PV = -$1,070 (negative because we are buying the bond)
Solving for I/Y, we find that the bond's yield to maturity is 8.000%.
b. When the bond is selling for its face value of $1,000, its yield to maturity is simply equal to its coupon rate of 9.7%.
c. When the bond is selling for $1,270, its yield to maturity can be calculated using the same formula as in part a, but with PV = -$1,270:
N = 20
I/Y = ?
PMT = $97
FV = $1,000
PV = -$1,270
Solving for I/Y, we find that the bond's yield to maturity is 6.316%.
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what creates comparative advantage? a. specialization b. scarcity c. lower costs d. population growth e. higher opportunity costs
Comparative advantage is created through specialization. The correct option is a.
When countries or individuals specialize in producing goods or services that they are relatively more efficient at, they can produce them at a lower cost than others. This allows them to trade with other countries or individuals who have a different comparative advantage, resulting in mutual gains from trade.
Scarcity, lower costs, and population growth can all affect a country's comparative advantage, but specialization is the key factor that creates it. Higher opportunity costs can also impact comparative advantage by encouraging countries or individuals to specialize in areas where they have a lower opportunity cost, resulting in greater efficiency and productivity.
The correct option is a. specialization.
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QUESTION 5 Rocket corp has 100 bonds outstanding. The bonds are annual coupon bonds with a face value of $1000, a coupon rate of 6.4%, and 11 years until the bond matures. If the YTM of the bonds is 7.5%, what is the total market value of the bonds for Rocket corp?
The total market value of the bonds for Rocket Corp is $94,480.
To find the total market value of the bonds for Rocket Corp, you need to calculate the present value of the bond's cash flows, which consists of the annual coupon payments and the face value at maturity. Here's a step-by-step explanation:
1. Calculate the annual coupon payment: Face value ($1000) x coupon rate (6.4%) = $64
2. Determine the number of periods (years) until maturity: 11 years
3. Find the yield to maturity (YTM) as a decimal: 7.5% = 0.075
4. Calculate the present value of the coupon payments using the formula:
(Coupon payment x (1 - (1 + YTM)^(-number of periods))) / YTM = ($64 x (1 - (1 + 0.075)^(-11))) / 0.075 ≈ $525.42
5. Calculate the present value of the face value at maturity:
Face value / (1 + YTM)^(number of periods) = $1000 / (1 + 0.075)^11 ≈ $419.38
6. Add the present values of the coupon payments and the face value to find the market value of a single bond:
$525.42 + $419.38 ≈ $944.80
7. Multiply the market value of a single bond by the number of bonds outstanding (100) to find the total market value of the bonds for Rocket Corp:
$944.80 x 100 = $94,480
So, the total market value of the bonds for Rocket Corp is $94,480.
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You are in charge of planning a concert for Beyoncé at NRGstadium. You need to pay Beyoncé $2 million for the show, $50,000for the technical crew, $50,000 to the back up dancers, and$200,000 to r ent the stadium. You know you can sell tickets for $200 each. What is the breakeven number of tickets you must sell?A) 10,000B) 11,500C) 12,500D) 13,000
The corrrect answer is B) 11,500. The breakeven number of tickets that need to be sold for the Beyoncé concert at NRG stadium is 11,500.
To calculate the breakeven number of tickets that need to be sold, we need to determine the total cost of the concert and divide it by the price per ticket.
The total cost of the concert is the sum of Beyoncé's fee, the technical crew and backup dancers' fees, and the stadium rental cost, which is $2 million + $50,000 + $50,000 + $200,000 = $2,300,000.
To break even, the total revenue generated from ticket sales needs to equal the total cost of the concert, which is $2,300,000. Therefore, we can set up an equation:
$200 x = $2,300,000
where x is the number of tickets that need to be sold.
Solving for x, we get:
x = $2,300,000 ÷ $200
x = 11,500
Therefore, the breakeven number of tickets that need to be sold for the Beyoncé concert at NRG stadium is 11,500.
Answer: B) 11,500
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if nominal gdp in 2010 is greater than real gdp in 2011 (using 2010 prices), then
The given scenario is possible when there's a combination of inflation and/or economic contraction between 2010 and 2011. Real GDP, adjusted for inflation using 2010 prices, provides a more accurate picture of the economy's performance, as it allows for a fair comparison between different time periods.
Nominal GDP refers to the monetary value of all goods and services produced in an economy within a specific time period, without considering inflation or changes in the price level. It is measured using the current market prices during that time period. Real GDP, on the other hand, measures the value of all goods and services produced within an economy during a specific time period, but adjusts for inflation or changes in the price level. This situation can occur due to the following reasons:
1. Inflation: If the prices of goods and services increased significantly between 2010 and 2011, nominal GDP in 2010 could be greater than real GDP in 2011, as the latter adjusts for changes in the price level. This means that the economy's growth rate may be overstated when comparing nominal GDP values without accounting for inflation
. 2. Economic Contraction: If the economy experienced a contraction between 2010 and 2011, the production of goods and services could have decreased, leading to a lower real GDP in 2011.
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what is the primary difference between singular channel distribution and multichannel distribution in ebook self-publishing?
The primary difference between singular channel distribution and multichannel distribution in ebook self-publishing is the number of platforms used to distribute your ebook.
In singular channel distribution, you choose to self-publish your ebook on only one platform (e.g., Amazon Kindle Direct Publishing). This limits your audience reach, but it can be easier to manage.
In multichannel distribution, you self-publish your ebook on multiple platforms (e.g., Amazon Kindle Direct Publishing, Apple iBooks, Barnes & Noble Nook, etc.). This increases your audience reach and potential sales, but it may require more management and coordination among the different platforms.
To summarize:
1. Singular channel distribution: Publishing on one platform, easier to manage, limited audience reach.
2. Multichannel distribution: Publishing on multiple platforms, increased audience reach, more management and coordination required.
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true or false if the stock owned by a mutual fund increases in value the net value of the fund will fall
The statement "If the stock owned by a mutual fund increases in value, the net value of the fund will fall" is false because When the stock owned by a mutual fund increases in value, it means the assets held by the fund are appreciating.
As a result, the net asset value (NAV) of the mutual fund will also increase. The NAV is calculated by dividing the total value of the fund's assets by the number of shares outstanding.
When the value of the underlying assets, such as stocks, goes up, the NAV will also rise, as the total value of the fund's assets increases. Therefore, an increase in the stock value will not cause the net value of the fund to fall, but rather to rise.
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A stock has expected return of 0.05. If its expected dividend growth increases from 0.01 to 0.02, its price changes by a. -25% b. 33% c. 100% d. it depends on the current dividend of the stock
Changes in the price of a stock depend upon the current dividend of the stock. The correct answer is option D " it depends on the current dividend of the stock"
The price of a stock is determined by its expected future cash flows, which include both the expected dividends and the expected price appreciation. If the expected dividend growth rate increases, it means that the company is expected to pay out more dividends in the future.
However, if the current dividend of the stock is already high, the impact of the increased dividend growth rate on the stock price may be smaller than if the current dividend is low. Therefore, depending on the stock's current dividend prices vary.
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true or false: it is typical for an organization to only inspect work-in-process and finished items that the company produced. it is not typical to inspect purchased items.
The given statement is False. Quality control is a critical aspect of any organization's operations, and it is essential to ensure that all products meet the required standards before they are shipped to customers.
This includes purchased items as well. Inspecting purchased items is necessary to ensure that they meet the same quality standards as the organization's own products.
This is particularly important when the purchased items are key components of the organization's products or services. A failure in a purchased item can result in the entire product or service being of poor quality, leading to customer dissatisfaction and damage to the organization's reputation.
Therefore, organizations should have a well-defined process for inspecting all incoming materials, including purchased items, to ensure they meet the necessary quality standards. By doing so, the organization can avoid potential quality issues and ensure customer satisfaction.
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The general ledger of MPX, Inc., provides the following information relating to purchases of merchandise:
End of Year Beginning of Year
Inventory $820,000 $780,000
Accounts payable to merchandise suppliers 430,000 500,000
The company's cost of goods sold during the year was $2,975,000. Compute the amount of cash payments made during the year to suppliers merchandise.
The amount of cash payments made during the year to suppliers of merchandise for MPX, Inc. is $3,085,000.Cash payments are made to the provider of services or products by the recipient in the form of banknotes or coins.
It may also entail paying employees within a company for the hours they worked or compensating them for tiny expenses that are too little to be processed through the accounts receivable system.
To compute the cash payments, we need to use the following formula:
Cash Payments = Beginning Accounts Payable + Purchases - Ending Accounts Payable
First, we need to find the Purchases value using the following formula:
Purchases = Cost of Goods Sold + Ending Inventory - Beginning Inventory
Now, plug in the given values:
Purchases = $2,975,000 (Cost of Goods Sold) + $820,000 (Ending Inventory) - $780,000 (Beginning Inventory)
Purchases = $3,015,000
Now, plug in the values into the Cash Payments formula:
Cash Payments = $500,000 (Beginning Accounts Payable) + $3,015,000 (Purchases) - $430,000 (Ending Accounts Payable)
Cash Payments = $3,085,000
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The current price of stock in Company XYZ is $45 and no ex-dividend dates are to occur for the next three months. The risk-free rate is 4.00% per year. The standard deviation for the period in question is 0.4. You are a financial advisor and one of your best clients is Mr. John Smith who is a senior-level manager at a Fortune 500 company. A portion of Mr. Smith’s incentive compensation is paid in restricted stock in the company he works for which he cannot sell for a period of three years from the date of the award of the shares. Smith has been employed at the company for 35 years and he has been in a senior position for the last 20 years. Mr. Smith has a concentrated equity position in the company owning 1,000,000 shares. More than 80% of his wealth is in the company stock. Assume that due to contractual obligations, he cannot sell his stock over the next three months. Due to his concentrated position, he wants to hedge against the price of XYZ stock falling more than 20%. He can do this by buying put options with a strike price of $36.
1. Assume that Mr. Smith does not have the necessary amount of liquid assets (other than his stock which he cannot sell) to be able to purchase these put options so he will have to enter into an equity collar. At what strike price should he strike the corresponding call options?
2. If Mr. Smith decides that he can raise enough cash to put up $200,000 to pay for some of the puts, how will it affect the strike price on the call?
3. If instead of three months, the restriction on his stock is six months, how will this change the hedge? Solve for the appropriate put and call strikes.
4. Using your answers from a) above, assume that after one month, the stock price goes up to $70 and Mr. Smith wants to unwind his hedge. Describe how you would go about terminating this hedge. Determine what it would cost to terminate this hedge.
5. Again, using your answers from a) above, if after one month the stock price went down to $28 instead and Mr. Smith wanted to terminate this hedge, what would be the economic repercussions? Calculate this amount.
6. As Mr. Smith’s financial advisor, would you recommend this strategy to Mr. Smith? Why or why not?
7. List down the benefits and advantages of this strategy.
Okay, here are the solutions to the questions:
1. Since Mr. Smith cannot sell his stock for 3 months and wants to hedge against a drop of more than 20%, a put option with a strike price of $36 would be appropriate. To collar this with call options, we would want the call strike to be $54 ( $45 current price + 20% hedge).
So put strike = $36 and call strike = $54.
2. If Mr. Smith can put up $200,000 for the puts, he can buy more put options which will allow a lower put strike, e.g. $32.
So now put strike = $32 and call strike = $51.
3. If the restriction is for 6 months instead of 3 months, a longer dated put and call would be needed.
For a 6 month hedge, put strike could be $30 and call strike $50.
4. If the stock price goes up to $70 after a month, Mr. Smith can:
- Buy back the put options at a lower price since the strike is now out of the money. This will cost less than the original purchase price.
- Sell the call options which are now in the money. This can generate a profit.
The total cost to terminate the hedge would be the amount spent buying back the puts plus any loss from selling the calls in the money.
5. If the stock price drops to $28, Mr. Smith would:
- Lose the $200,000 put premium since the puts are now deep in the money.
- Potentially have to exercise the puts and sell the stock at $28, taking a $17 per share loss.
- Lose the value of the call options which would expire worthless.
The economic loss could be substantial in this scenario.
6. I would recommend this strategy to Mr. Smith with some cautions:
Pros: Provides downside protection for a concentrated position. Allows Mr. Smith to keep the stock long-term.
Cautions: The strategy is complex and expensive. There are opportunities for losses as shown above. Mr. Smith needs to monitor the position closely. The hedge may not provide full downside protection.
Overall, for a large concentrated position, a hedge could provide some comfort but needs to be done carefully with full understanding of the risks and costs. Close monitoring is required.
The benefits of the strategy are downside protection and the ability to keep a large long-term stake in the company. But there are also risks of losses and the costs of implementing and unwinding the hedge. Proper evaluation of these pros and cons is necessary before employing this strategy.
ryan neal bought 2,400 shares of ford (f) at $16.02 per share. assume a commission of 1% of the purchase price. ryan sells the stock for $20.33 with the same 1% commission rate.what is the gain or loss for ryan?
Ryan gained $9,471.60 from selling 2400 Ford shares, including commissions.
How much did Ryan gain or lose from selling the Ford shares?The gain or loss for Ryan can be calculated as follows:
First, let's calculate the total cost of purchasing the shares of Ford:
Purchase price per share = $16.02
Number of shares purchased = 2,400
Total purchase price = $16.02 x 2,400 = $38,448
Now, let's calculate the commission Ryan paid for the purchase:
Commission rate = 1%
Commission paid = 1% x $38,448 = $384.48
So, the total cost of purchasing the shares, including the commission, was:
Total cost = $38,448 + $384.48 = $38,832.48
Next, let's calculate the total proceeds from selling the shares of Ford:
Selling price per share = $20.33
Number of shares sold = 2,400
Total selling price = $20.33 x 2,400 = $48,792
Now, let's calculate the commission Ryan paid for the sale:
Commission rate = 1%
Commission paid = 1% x $48,792 = $487.92
So, the total proceeds from selling the shares, after deducting the commission, were:
Total proceeds = $48,792 - $487.92 = $48,304.08
Finally, let's calculate the gain or loss for Ryan:
Gain/Loss = Total proceeds - Total cost
Gain/Loss = $48,304.08 - $38,832.48
Gain/Loss = $9,471.60
Therefore, Ryan's gain from selling the shares of Ford was $9,471.60
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On April 1st last year, Company S had assets of £79.0 million and liabilities of £27.1 million. In the year ended March 31st this year, Company S made a profit of £12.3 million before tax, of which £2.3 million is payable in tax and £3.3 million has been distributed as a dividend. No further dividends have been announced. Company S has 300 million ordinary shares in issue, each with a nominal value of 10p of which 200 million are listed on the London Stock Exchange. On April 1st last year, the market price of each of these shares was 165.56p. On March 31st this year it was 140.25p. None of Company S's assets were revalued during the year. Company S did not acquire or sell any other companies, did not issue any further shares or bonds and did not redeem any shares or bonds. There were no changes in reserves other than those stated above. How much was the book value of the shareholders' equity in Company S at March 31st this year, in millions of £? Give your answer to 1 decimal place in £ million, without commas. For example, for £33.762 million enter 33.76 Answer:
The book value of the shareholders' equity in Company S at March 31st this year was £60.4 million.
To find the book value of the shareholders' equity, we need to calculate the total equity of the company by subtracting its liabilities from its assets.
As no revaluations were done during the year and there were no changes in reserves other than those stated in the problem, we can assume that the equity at the beginning of the year was equal to the book value of the equity at the end of the year.
Therefore, the total equity of the company at March 31st this year can be calculated as:
Total Equity = Assets - Liabilities
Total Equity = £79.0 million - £27.1 million
Total Equity = £51.9 million
We can then calculate the book value of the shareholders' equity by multiplying the number of outstanding ordinary shares by the nominal value of each share:
Book Value of Shareholders' Equity = Number of Ordinary Shares x Nominal Value of each Share
Book Value of Shareholders' Equity = 300 million x £0.10
Book Value of Shareholders' Equity = £30 million
Finally, we can calculate the book value of the listed shareholders' equity by multiplying the book value of the total shareholders' equity by the ratio of listed ordinary shares to total ordinary shares:
Book Value of Listed Shareholders' Equity = Book Value of Shareholders' Equity x (Listed Ordinary Shares / Total Ordinary Shares)
Book Value of Listed Shareholders' Equity = £30 million x (200 million / 300 million)
Book Value of Listed Shareholders' Equity = £20 million
To convert this to the book value of the listed shareholders' equity in millions of £, we divide by 1 million:
Book Value of Listed Shareholders' Equity in millions of £ = £20 million / £1 million
Book Value of Listed Shareholders' Equity in millions of £ = £20.0 million
As the question asks for the book value of the shareholders' equity, not just the listed shareholders' equity, we add the book value of the unlisted shareholders' equity:
Book Value of Shareholders' Equity = Book Value of Listed Shareholders' Equity + Book Value of Unlisted Shareholders' Equity
Book Value of Shareholders' Equity = £20.0 million + (£51.9 million - £30.0 million)
Book Value of Shareholders' Equity = £60.4 million
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What type of credit is a monthly telephone bill? a) single -payment credit b) installment credit c) revolving credit.
A monthly telephone bill is an example of revolving credit i.e. option C. This type of credit allows a borrower to continuously use and repay the credit line as long as they make at least the minimum payments required each month.
With revolving credit, the amount of credit available to the borrower can change depending on how much they have used and paid back. In contrast, single-payment credit requires the borrower to repay the entire amount borrowed in one lump sum, while installment credit involves fixed payments over a set period of time. Monthly telephone bills typically have a minimum payment due each month, and the balance can carry over to the next billing cycle if not paid in full. Therefore, it falls under the category of revolving credit.
Thus, the right option is C.
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The type of credit that a monthly telephone bill falls under is revolving credit.
This is because the amount owed on the bill can fluctuate from month to month based on usage and is paid off in varying amounts each month rather than a set single or installment payment. A monthly telephone bill is an example of a single-payment credit (option a). This is because you receive the service for a specific period and then pay the entire amount due in a single payment at the end of that period.
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Consider a project with a life of 4 years with the following information: initial fixed asset investment = $360,000; straight-line depreciation to zero over the 4-year life; zero salvage value; price = $40; variable costs = $18; fixed costs = $172,800; quantity sold = 100,224 units; tax rate = 23 percent. How sensitive is OCF to changes in quantity sold? Multiple Choice a. $19.31 b. $16.94 c. $0.06
The sensitivity of OCF to changes in quantity sold is $19.31.(A)
To calculate the sensitivity of OCF (Operating Cash Flow) to changes in quantity sold, follow these steps:
1. Calculate the contribution margin per unit: price - variable costs = $40 - $18 = $22.
2. Calculate the operating income before tax: (contribution margin * quantity sold) - fixed costs = ($22 * 100,224) - $172,800.
3. Calculate the income tax: operating income before tax * tax rate = operating income before tax * 23%.
4. Calculate the OCF: operating income before tax - income tax.
5. Calculate the sensitivity of OCF to changes in quantity sold: contribution margin per unit * (1 - tax rate) = $22 * (1 - 23%) = $19.31.(A)
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AllCity Inc. is financed 40% with debt, 15% with preferred stock, and 45% with common stock. Its pre-tax cost of debt is 6%; its preferred stock pays an annual dividend of $3.25 and is priced at $28. It has an equity beta of 1.3. Assume the risk-free rate is 2%, the market risk premium is 6%, and AllCity's tax rate is 35%. What is its after-tax WACC? What is its after-tax WACC? 'wacc (Round to five decimal places.)
The after tac WACC for the AllCity Inc. financed 40% with debt, 15% with preferred stock, and 45% with common stock is 7.71%.
The weighted average cost of capital (WACC), which includes ordinary stock, preferred stock, bonds, and other types of debt, is the average after-tax cost of capital for a company. The WACC is the typical interest rate that a business anticipates paying to finance its assets.
Because WACC reflects the return that both bondholders and shareholders require in order to provide the firm with capital in a single value, it is frequently used to calculate necessary rate of return (RRR). Because investors will want larger returns, a company's WACC is likely to be higher if its stock is very volatile or if its debt is seen as hazardous.
Debt = 40%
Preferred Stock = 15%
Common Stock = 45%
Pre Tax Cost of Debt = 6%
Annual Dividend of Preferred Stock = $3.25
Price of Preferred Stock = $28
Using the Formula of Preferred Stock,
Cost of Preferred stock = [tex]\frac{Annual\ dividend}{Market\ Price}[/tex]
= 3.25 / 28
= 0.1160714285714
= 11.61%.
Using the Formula of Capital Asset Pricing Model
Equity Beta = 1.3
Risk-free rate = 2%
Market Risk Premium = 6%
[tex]ER_i=R_f+\beta(ER_m-R_f)[/tex]
= 2% + 1.3(6%)
= 2% + 7.8%
[tex]ER_i[/tex] = 9.8%.
Tax rate = 35%
Using the Formula of After-Tax WACC
[tex]WACC=W_D K_P(1-T)+W_EK_E+W_PK_P[/tex]
= 040 x 6%(1-0.35) + 0.45 x 9.8% + 0.15 x 11.61%
= 1.56 + 4.41 + 1.7415
WACC = 7.71%.
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steelworker mike lefevre cannot take pride in his work because:
Mike Lefevre, a steelworker, cannot take pride in his work because he is facing a challenging economic environment. The steel industry has been hit hard by global competition and automation, leading to job losses and a decrease in wages.
This has left Mike, along with many other steelworkers, struggling to make ends meet. Mike is also facing the threat of losing his job due to the increased efficiency of automated processes. These economic pressures have made it difficult for Mike to take pride in his work, as he is constantly aware of the precariousness of his situation. Furthermore, Mike is also dealing with the psychological burden of not knowing what the future holds for him and his family.
These factors combine to make it difficult for Mike to take pride in his work, even if he is performing his job duties well.
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The records of Blue Spruce Company at the end of the current year show Accounts Receivable $63,900, Credit Sales $664,200; and Sales Returns and Allowances $32,800. (a) If Blue Spruce uses the direct write-off method to account for uncollectible accounts and Blue Spruce determines that Matisse's $738 balance is uncollectible, what will Blue Spruce record as bad debt expense? (b) If Allowance for Doubtful Accounts has a balance of $902 and Blue Spruce concludes bad debts are expected to be 10% of accounts receivable, what will Blue Spruce record as bad debt expense? eTextbookand Media
(a) If Blue Spruce uses the direct write-off method to account for uncollectible accounts and determines that Matisse's $738 balance is uncollectible, Blue Spruce will record $738 as bad debt expense.
(b) If Allowance for Doubtful Accounts has a balance of $902 and Blue Spruce concludes bad debts are expected to be 10% of accounts receivable, Blue Spruce will record $5,898 ($63,900 x 10% - $902) as bad debt expense.
(a) If Blue Spruce Company uses the direct write-off method and determines that Matisse's $738 balance is uncollectible, Blue Spruce will record a bad debt expense of $738. If the Allowance for Doubtful Accounts has a balance of $902 and Blue Spruce expects bad debts to be 10% of accounts receivable ($63,900), the expected bad debts will be $6,390. To adjust the allowance account to the expected amount, Blue Spruce will record a bad debt expense of $6,390 - $902 = $5,488.
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(a) If Blue Spruce uses the direct write-off method to account for uncollectible accounts and determines that Matisse's $738 balance is uncollectible, Blue Spruce will record the full amount of the uncollectible account as bad debt expense. Therefore, the bad debt expense recorded will be $738.
(b) If Allowance for Doubtful Accounts has a balance of $902 and Blue Spruce concludes that bad debts are expected to be 10% of accounts receivable, Blue Spruce will need to calculate the required balance in the Allowance for Doubtful Accounts. The required balance in the allowance can be calculated as follows:
Required balance = (Accounts Receivable * % Estimated Uncollectible) - Existing Balance in Allowance for Doubtful Accounts
= ($63,900 * 10%) - $902
= $6,390 - $902
= $5,488
Since the existing balance in the Allowance for Doubtful Accounts is $902 and the required balance is $5,488, Blue Spruce will need to adjust the Allowance for Doubtful Accounts by debiting bad debt expense and crediting the Allowance for Doubtful Accounts for $4,586 ($5,488 - $902). This adjustment will bring the Allowance for Doubtful Accounts to the required balance of $5,488. Therefore, the bad debt expense recorded will be $4,586.
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when mcdonald's sells cheeseburgers in india, there is absolutely no beef or pork used. the mcdonald's menu in india features indian burgers that are 100 percent vegetarian. india is predominantly a hindu country, and hindus are strict in terms of not eating beef because they consider the cow as a holy manifestation of the divinity. this scenario is an example of . group of answer choices product correctness product adaptation product innovation product variation
The scenario described is an example of product adaptation, which is the process of modifying a product or service to better meet the needs and preferences of a specific market or culture.
In this case, McDonald's adapted its menu to the Indian market by offering 100 percent vegetarian burgers that do not include beef or pork, which are not consumed by Hindus due to religious beliefs.Product adaptation is a common strategy used by companies when entering new markets, especially when cultural or religious factors need to be taken into consideration.
By adapting its products to local tastes and preferences, companies can increase their chances of success in new markets and better connect with their target customers.In the case of McDonald's in India, product adaptation has allowed the company to successfully operate in the country and cater to the needs and preferences of its predominantly Hindu customer base.
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dollar amounts stated are in thousands. a. compute trend percentages for the above items taken from the financial statements of lopez plumbing over a five-year period. treat 2017 as the base year. b. state whether the trends are favorable or unfavorable.
This is a two part question and the answer is given in two separate headings.
Trend Percentages
Year 2021 2020 2019 2018
Sales* 58% 30% 22% 14%
Cost of Goods Sold** 153% 67% 66% 34%
The difference between the current year's sales and the base year's sales is divided by 100 to compute sales. The proportion, for instance, is 14% for 2018 [(57,000 - 50,000) / 50,000 * 100]. in the same manner as previous years' calculations. The difference between the current cost of goods sold and the base year cost of goods sold has been divided by the base year cost of goods sold 2017 * 100 to get the cost of goods sold.
The proportion, for instance, is 14% for 2018 [(40,200 - 30,000) / 30,000 * 100]. in the same manner as previous years' calculations. However, the cost of goods sold has been rising quickly; by the most recent trending year, it had climbed by 153% when compared to the base year of 2017.
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