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Best Way Cement Inc., and , Askari Cement Inc., are rivals in the manufacture of cement
industry . Some financial statement values for each company is as following. Use them in a ratio
analysis that compares the firms’ financial leverage and profitability.
Item Best Way Cement Inc., . Askari Cement Inc.
Total assets 120,000,000 120,000,000
Total equity (all common) 119,000,000 60,000,000
Total debt 12,000,000 5,000,000
Annual interest 1,200,000 500,000
Total sales 255,000,000 255,000,000
EBIT 61,250,450 61,250,450
Earnings available for
common stockholders
32,690,000 30,450,000
Calculate the following
a.)debt and coverage ratios for the two companies. Discuss their financial risk and ability to
cover the costs in relation to each other.
(1) Debt ratio
(2) Times interest earned ratio
b) Calculate the following profitability ratios for the two companies. Discuss their profitability
relative to each other.
(1) Net profit margin
(2) Return on total assets
(3) Return on common equity
Renz(Pty) Ltd operates from building it is leasing from property developer.Renz(Pty) Ltd occupied the building on 1 July 2016 and pays monthly rental..The monthly rental as of 1 July 2017 are 14000 and there is 10% annual increase.The lease is for four years....calclulations and journal entries
In a world of positive interest rates, a bond is priced below its face value. This must mean that;
GreenPower is an Irish-owned and headquartered electricity supply business with operations
in Ireland, the UK, and France. It provides electricity to domestic and commercial users in each
of these countries. It receives 50% of its revenue in Ireland, 30% in the UK, and 20% in France.
Total revenue is approximately €25 million equivalent.
It does not generate electricity. It purchases electricity that is generated from renewable
sources from the National Grid in each country and sells that electricity on to customers. It
sources the electricity within the country in which it is ultimately sold to customers. There is
a lag of 30 days between the time it purchases electricity from the National Grid and when it
must pay for that electricity.
It bills customers in Ireland and the UK on a monthly basis in arrears for the usage in that
month. In France the billing period is every two months. These are standard billing periods
within each market.
The business is in a surplus cash position generally, i.e. over the course of a year it will have a
positive bank balance. However, periodically there will be times when it goes into substantial
overdraft when it must pay the National Grids in each country for the electricity it has
purchased. The National Grids are very strict on the 30 day payment terms and not meeting
these terms would be very damaging to the business' relationship with its key supplier.
The GreenPower Finance Director has recently been appointed and is trying to develop a
more efficient cash management system. She believes the business is not managing its cash
well and could make savings or make risk management easier if they had better ways of
ensuring consistent cashflows.
How would you advise the Finance Director on banking structures or other things the
business could do to make their cash management more efficient
Why was the federal reserve eatablished
Your firm buys a new equipment for Rs. 60,000. It will have a useful life of six years, with zero salvage value. It is to be depreciated by the SL method over six years, with placement at the start of the first year. It will give your firm savings of Rs. 16,000 per year. The tax rate will be 13%. However, you decide to sell it at the end of the third year, for Rs. 28,000. Calculate the after-tax IRR for this?
Q.1Alexander Company purchased a piece of equipment for $12,000 and depreciated it for three years over a five-year estimated life with an expected residual value at the end of five years of $2,000. At the end of the third year, Alex decided to upgrade to equipment with increased capacity and sold the original piece of equipment for $7,200. Calculate the gain or loss on the disposal at the end of the third year.
Tariq wants to borrow Rs.50,000 for a period of 5 years. The lenders offer him a choice of three payment structures:
i. Pay all of the interest (10% per year) and principal in one lump sum at the end of 5 years;
ii. Pay interest at the rate of 10% per year for 4 years and then a final payment of interest and principal at the end of the 5th year;
iii. Pay 5 equal payments at the end of each year inclusive of interest and part of the principal.
a) Under which of the three options will Tariq pay the least interest and why?
b) Calculate the total amount of the payments and the amount of interest paid under each alternative.
Suppose 90-day investments in Britain have a 6% annualized return and a 1.5% quarterly (90-day) return. In the U.S., 90-day investments of similar risk have a 4% annualized return and a 1% quarterly (90-day) return. In the 90-day forward market, 1 British pound equals $1.65. If interest rate parity holds, what is the spot exchange rate ($/£)?
