ADMS 4504 Final: Final Exam Review

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maroonelk473

18 Jan 2012

School

York University

Department

Administrative Studies

Course

ADMS 4504

Professor

Griffin

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Document Summary

Fundamental analysis- short,med,large range determine price changes in securitys. Quantitative analysis- interest rates, econ variables, stock valuation. Technical analysis- patterns/charts of past stock price predict future prices (stock mkt). Random walk theory- stock info disseminated, price changes no relation previous prices. Rational expectations hypoth- ppl rational/make intelligent decision. (security equal risk=highest risk) (security w/same rate=lower risk) Efficient mkt hypoth- security mkt price is difficult to outperform mkt. 1)emerging growth- neg cash, private owned, high risk of failure. 3)mature- slower growth, profit declines, earnings remain, customer loyalty. 4)declining- new products/technology, min growth, good cash flow. Liquidity ratio- company ability to meet short term. Current ratio- liquidity short term (current assets:cash, acc receivable/liability). Quick ratio (acid test)- test liquidity (current assets-inventory/liability). Debt/equity ratio- debt large reduces debt holder protection & increase risk. Price earnings ratio- investors pay for earnings, pe high increases stock mkt. Derivatives- drive value from underlining assets, all or nothing (highest)

Related Questions

Ratio	2010	2009	2008	2010 Industry Average
Long-term debt	0.45	0.40	0.35	0.35
Inventory turnover	62.65	42.42	32.25	53.25
Depreciation/total assets	0.25	0.014	0.018	0.015
Daysâ sales in receivables	113	98	94	130.25
Debt to equity	0.75	0.85	0.90	0.88
Profit margin	0.082	0.07	0.06	0.075
Total asset turnover	0.54	0.65	0.70	0.40
Quick ratio	1.028	1.03	1.029	1.031
Current ratio	1.33	1.21	1.15	1.25
Times interest earned	0.9	4.375	4.45	4.65
Equity multiplier	1.75	1.85	1.90	1.88

Referring to the given data, the CEO of WQY Inc. wrote, "2008was a good year for the firm with respect to our ability to meetour short-term obligations. We had higher liquidity largely due toan increase in highly liquid current assets (cash, accountreceivables, and short-term marketable securities)."

Do you think the CEO is correct in making this statement?Explain your stand and use only the given data for youranalysis.

Submission Requirements:

Submit the completed assessment as a Word document.

1.) analyze ratios

liquidity ratios

LIQUIDITY Ratios	Are wemeeting our current obligations?
Working Capital	$ 7,143	$ 2,162	$ 2,357	$ (1,204)	$ 1,888
Current Ratio	1.55	1.51	1.52	1.57	1.52

2.) Solvency ratio: analyze the ratio

SOLVENCY Ratios	Are wehandling debt appropriately?
Financial LEVerage	2.82	2.95	2.91	2.74	2.94
Debt ratio	65%	66%	66%	64%	66%
Free Cash Flow	$ (1,066)	$ (2,048)	$ (3,067)	$ 6,225	$ 7,282

3.) Investment Appeal of Target analysis

Dividends per share	$ (1.10)	$ (1.32)	$ (1.58)	$ (1.90)	$ (2.13)
Market Value per share	$ 59.00	$ 56.00	$ 54.00	$ 53.00	$ 53.00
Dividend Yield	-1.87%	-2.37%	-2.93%	-3.59%	-4.01%
Price-to-Earnings (P/E) ratio	-53.49	-42.27	-34.14	-27.84	-24.91
Price-to-Sales (P/S) ratio	38.09	37.00	35.44	33.69	34.98
Price-to-Book (P/B) ratio	22.00	23.64	25.13	25.56	25.57

4.) Du pont Analyis analysis

DuPont Analysis of ROE = ROS xAsset turnover = ROA x Financial LEVerage = ROE
Return on Sales(ROS), also known as Net Profit Margin	4.19%	4.09%	2.77%	-2.25%	4.56%
Asset Turnover	1.60	1.57	1.48	1.63	1.79
Return on Assets (ROA)	6.70%	6.43%	4.09%	-3.67%	8.17%
Financial LEVerage	2.82	2.95	2.91	2.74	2.94
Return on Equity (ROE)	18.91%	18.96%	11.90%	-10.08%	24.03%

e.) How does your stack up against its competiton?graph/charts

(1.) is your company in attractive industry? Yes/No

(2.) What metrics determine superior companies for yourindustry?

f.) State your investment thesis-investment philosophy(graphs/charts) (target corporation ) 2011-2015

a.) Sustainability economic moats profitability ? your test yourcompany pass/fail explain

b) growth? stable? dividends ? your test yours company pass/failexplain

c.) financial health? financial risk? your test your companypass/fail explain

d.) quality of income? your test your company pass/failexplain

e.) good value? buy now your test your company pass/failexplain

This stock appears to be trading below/ about /over theprice.

g.) investment decisions (target corporation)

overall, this company is a long term buy/ review again at lowprice / bust )

Why? list 5 good reasons 1, 2, 3, 4, 5,

aquamarinemacaw225

Joshua & White Technologies: December 31 Balance Sheets
(Thousands of Dollars)

Assets			2010	2009
Cash and cash equivalents			$21,000	$20,000
Short-term investments			3,759	3,240
Accounts Receivable			52,500	48,000
Inventories			84,000	56,000
Total current assets			$161,259	$127,240
Net fixed assets			218,400	200,000
Total assets			$379,659	$327,240

Liabilities and equity
Accounts payable			$33,600	$32,000
Accruals			12,600	12,000
Notes payable			19,929	6,480
Total current liabilities			$66,129	$50,480
Long-term debt			67,662	58,320
Total liabilities			$133,791	$108,800
Common stock			183,793	178,440
Retained Earnings			62,075	40,000
Total common equity			$245,868	$218,440
Total liabilities and equity			$379,659	$327,240

Joshua & White Technologies December 31 Income Statements
(Thousands of Dollars)
			2010	2009
Sales			$420,000	$400,000
Expenses excluding depr. and amort.			327,600	320,000
EBITDA			$92,400	$80,000
Depreciation and Amortization			19,660	18,000
EBIT			$72,740	$62,000
Interest Expense			5,740	4,460
EBT			$67,000	$57,540
Taxes (40%)			26,800	23,016
Net Income			$40,200	$34,524

Common dividends			$18,125	$17,262
Addition to retained earnings			$22,075	$17,262

Other Data			2010	2009
Year-end Stock Price			$90.00	$96.00
# of shares (Thousands)			4,052	4,000
Lease payment (Thousands of Dollars)			$20,000	$20,000
Sinking fund payment (Thousands of Dollars)			$0	$0

Ratio Analysis			2010	2009	Industry Avg
Liquidity Ratios
Current Ratio			2.38	2.52	2.58
Quick Ratio			1.17	1.41	1.53
Asset Management Ratios
Inventory Turnover			1.11	1.22	7.69
Days Sales Outstanding			45.63	43.80	47.45
Fixed Assets Turnover			1.92	2.00	2.04
Total Assets Turnover			3.81	5.64	1.23
Debt Management Ratios
Debt Ratio					32.1%
Times-interest-earned ratio					15.33
EBITDA coverage ratio					4.18
Profitability Ratios
Profit Margin			9.57%	8.63%	8.86%
Basic Earning Power			19.16%	18.95%	19.48%
Return on Assets			10.59%	10.55%	10.93%
Return on Equity			21.87%	19.35%	16.10%
Market Value Ratios
Earnings per share					NA
Price-to-earnings ratio					10.65
Cash flow per share					NA
Price-to-cash flow ratio					7.11
Book Value per share					NA
Market-to-book ratio					1.72

a. Has Joshua & White's liquidity position improved or worsened? Explain.
The position of JW has worsend because there ration has fallen from 1.41 to 1.17

						b. Has Joshua & White's ability to manage its assets improved or worsened? Explain.


						c. How has Joshua & White's profitability changed during the last year?


d. Perform an extended Du Pont analysis for Joshua & White for 2008 and 2009.
	ROE =	PM x	TA Turnover x Equity Multiplier
2010
2009



						e. Perform a common size analysis. What has happened to the composition
(that is, percentage in each category) of assets and liabilities?

Common Size Balance Sheets
Assets			2010	2009
Cash and cash equivalents
Short-term investments
Accounts Receivable
Inventories
Total current assets
Net fixed assets
Total assets

Liabilities and equity			2010	2009
Accounts payable
Accruals
Notes payable
Total current liabilities
Long-term debt
Total liabilities
Common stock
Retained Earnings
Total common equity
Total liabilities and equity

Common Size Income Statements			2010	2009
Sales
Expenses excluding depr. and amort.
EBITDA
Depreciation and Amortization
EBIT
Interest Expense
EBT
Taxes (40%)
Net Income



						f. Perform a percent change analysis. What does this tell you about the change in profitability
and asset utilization?

Percent Change Balance Sheets				Base
Assets			2010	2009
Cash and cash equivalents
Short-term investments
Accounts Receivable
Inventories
Total current assets
Net fixed assets
Total assets

				Base
Liabilities and equity			2010	2009
Accounts payable
Accruals
Notes payable
Total current liabilities
Long-term debt
Total liabilities
Common stock
Retained Earnings
Total common equity
Total liabilities and equity

				Base
Percent Change Income Statements			2010	2009
Sales
Expenses excluding depr. and amort.
EBITDA
Depreciation and Amortization
EBIT
Interest Expense
EBT
Taxes (40%)
Net Income

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ADMS 4504 Final: Final Exam Review

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