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An organization can easily depict its financial status by use of financial ratios. The most common are the Liquidity ratios which entail current ratio and the quick ratio. The current assets and current liabilities ratio is known as the current ratio. The quick ratio is similar to the current ratio only it doesn’t involve the firm’s inventory in the calculation of total current assets. High liquidity ratios show that a firm has the capability to pay off all its debtors with the current assets and still have money to spare for the business operations. Low liquidity ratios however show that the firm, if asked to, cannot, or would struggle to pay off their debts and still have funds for operation. The higher the liquidity ratio, the better the chances for a firm to get loans and the lower the liquidity ratio, the slimmer the chances of the firm to be funded through loans. Funds can be used for development of projects of the firm. This means that with a high liquidity ratio, the owners can plan on development projects as they can be assured of a source of funding. If the liquidity ratio is low, the planners can adjust accordingly to increase their ratio by, for instance, pausing some development projects. This doesn’t always hold true since some lenders don’t consider the liquidity ratio when funding firms. A firm can hence prepare for development projects and never see their implementation due to less funds. (Net MBA, 2010)
Assuming that all cash flows are discounted at 10%, if NPC chooses to wait a year before proceeding, how much will this increase or decrease the project's expected NPV in today's dollars (i.e., at t = 0), relative to the NPV if it proceeds today?
The lack of historical data makes it difficult to create a forecast and budget for a new company. Class, how many years of historical sales data do you think are necessary in order to create an accurate forecast of sales? Explain.
A bond with a coupon rate of 4% making annual payments is being offered with a YTM of 5%. If the bond has 12 years until it matures, what is the current yield of the bond? (Express your answer as a percentage. example: 3.45)
Suppose the 90-day forward quotes on the Euro and the Danish kroner are $ 0.4002-10 and $0.1180-90, respectively. What is the direct 90-day forward quote for the kroner Frankfurt?
With a projected annual sales growth of 15% projected annual earnings retention of 12%, and a cash cycle of 30 days, is there a need for external financing?
You have been given that a 6-month 100 Call option on XYZ stock is trading at $4.25. A put with the same strike price and expiration is trading @ $1.25. If the current price of the sock is 102, what is the implied interest rate?
Bonds A, B, C and D are zero-coupon bonds with par value $1,000 each and yields to maturity of 6 percent, 8 percent, 10 percent and 12 percent respectively. Bond A matures in one year, bond B in two, bond C in three and bond D in four years. write ex..
Calculate break-even in DOLLARS given the following information: sales per unit $40, variable costs $15, fixed costs $15,000, and desired profit $20,000.
Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 3% and the market risk premium is 8%. What is the per-share value of Van Buren to Harrison Corporation?
Compute the payback statistic for Project A and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 8 percent and the maximum allowable payback is four years.
Discuss and analyse all the issues in order, and any other implications arising from this scenario for presentation to Mark Golledge .
Figure 3.6 gives a decision tree for Mr. Smart’s situation. Mr. Smart is risk-averse. The amount of utility he derives from a payoff is Utility = 2In (payoff). Because of a planned major purchase, Mr. Smart intends to sell his investment one year lat..
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