Analyzing financial assignments

Résumé du document

Current Assets: The current assets are coming from three mains accounts in balance sheet of the financial year of a company. Indeed, the current assets show us a picture of the financial state of the company at the end of this year:
-At first the amount of cash or in other words the money earned by the company from their sales for example or even from their loan borrowed to the bank
-Secondly, the account receivables which is the money that the company have already earned by selling their products to their customers but they have not already paid to the company. In other words, the account receivables is the money resulting from the sales of the company during this financial year but not effectively paid by their customers and that the company will actually receive in the next few weeks or months (such as a "debt from the customer to the company"). It is all the stakeholders as clients, customers and so one owe to the company.
-Thirdly, the inventory features all materials and products manufactured by the company that the company has not sold for the moment.
To finish, we can call the current assets as short term assets because these accounts are supposed to be back into cash within less of one year.

Extraits

[...] We have at first, Net income = 10% of Sales, so it is equal to 10. Then, taxes rate = 20% so EBT x 0,8 = 10 and EBT = 12,5 Interest rate = 10% of the loan (LT Debts = 350) 0.1 x 350 = 35 EBIT = 12,5 + 35 = 47,5 Discuss the meaning of the following three accounts Current Assets, Retained Earnings, and Operating Expenses. Give a description of what each account means. Include an answer to the following questions: Current Assets: The current assets are coming from three mains accounts in Balance Sheet of the financial year of a company. [...]

[...] To decrease the fixed asset turnover, the company has to invest in fixed assets and decrease its sales. [...]

[...] They should now use more their equity to finance their expansion instead of borrowing money. The proof is that their ROE is good at a level 20%. The company is therefore capable of generating cash internally and by the way avoid the risk of having to much debts. The problem is gross margin resulting from operational profits is really good and sustainable for the company and we see that the amount of debts borrowed crashes down the net income of the company with a really high amount of interests that have to be paid to banks. [...]

[...] When the financial is high, companies are using debt in order to finance its Assets. Does the company in your calculations have high or low financial leverage? According to my calculations: Total of Assets = 250 Total of Liabilities = 200 and Total of Equity = 50 So Financial Leverage = 250 / 50 Financial Leverage = 5 The company has a relatively high financial leverage. The company use mainly the banks by borrowing and creating debts to finance its projects/ its assets instead of using its equity. [...]

[...] An important leverage for succeed it is to check and to squeeze the costs of the buying department to become more effective at term. Controling better their value chain and the costs allocated to each step is really mportant and efficient. We do not have of course to forget that all this ratios cannot be used alone nut compared to the other direct competitors of the company because each sector, each industries have their own specificities of running which have therefore a strong impact on these ratios (negative or positive). [...]