Problem that arises when benchmarking against competitors

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Assignment Instructions.

Question 1. What's The Home Depot's current ratio? How's it compare to the industry average? How can The Home Depot reduce its weighted average cost of capital? If a company doesn't closely monitor its receivables, is it possible for a company's bonds to eventually be downgraded? It's important for companies to closely monitor their receivables. One way that companies can monitor their receivables is to create an aging schedule. An aging schedule groups a company's receivables by the account's age. For example, it can show how much of the receivables are for various time periods such as 0 to 10 days, 11 to 30 days, 31 to 45 days, and over 45 days. Aging schedules are created from a company's accounts receivable ledger; there's not enough detail in a company's financial statements to create an aging schedule.

Question 2. What is the major problem that arises when benchmarking against competitors? How can this problem be overcome? What does it mean to benchmark by industry? Why is this needed when conducting a financial ratio analysis?

Question 3. Discuss the operating and cash cycles, and why they it is important for a financial manager to have a good understanding of how cash and operating cycles impact business operations.

Question 4. If you won the lottery and had the choice of a lump-sum payoff or an annuity payoff, what factors would you consider besides the implied interest rate (indifference interest rate) in selecting the payoff style? Provide a quantitative example to illustrate your choice.

Question 5. Explain the payback period model and its two significant weaknesses. How does the discounted payback period model addresses one of the problems?

Question 6. What are some of the features that could be included with a bond prospectus that may have an impact on the yield of a new bond issue?

Question 7.What is an incremental cash flow for a project? What concepts do we need to examine to help understand how to estimate the incremental cash flow of a project? What else is needed for deciding whether or not to choose a project?

Reference no: EM132540026

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