Total netoperatingcapit al is s um of net ope rati n g wor king c apit alandoperatinglong-term assets, such as net plant and equipm ent. Operati ng c apit al also is equal to the net amount of capit al raised from investors. This is t he amount of int e rest-bearingdebt pluspreferredst ock plus comm on equit y mi nus short -term i nvestm ents. Net cash flow, as opposed to accounti n g n et income, is the sum of net in come plus non cash adjust ments.
N OPAT, net ope rati n g profit after t ax es, is the amoun t of profita companywouldgenerateifith ad no debt and no financi al assets. Fr e e c ashflowis thecashflowactuallyavail able for dist ributi on to investors afterthecompanyhas madeallinvestm ents in fix ed assets and working capit al necessarytosustainongoing operati ons. It show s the rate of return that is gen erat ed b y assets.
Market v alue added is the diff eren ce betwe en th e mark et value of the fir m i. If the book values of debt and prefer red stock ar e equ al to their market values, then MV A is also equal to the differen ce betw een the ma r ket value of equityandtheamountofequitycapit al that investors suppl ied.
Economi c value addedrepresentstheresidual income that rem ains afte r the cost o f all capital, includingequitycapital, has been dedu cted. Taxableincomeisdefinedas gross inc ome less a set of ex empti ons and deducti ons which a re spe ll ed out in the inst ructi ons to the tax forms indi vidualsmust file.
Marginaltaxrateis defined as the tax rate on the last unit of income. Average taxrateiscalculated b y takin g the tot al amou nt of tax paid divi ded b y tax able income. C apit al gain loss is the profit loss from th e sa le of a c apit al ass et for more less than it s purchase p rice.
Ordinar y co rp orat e oper a ti ng loss es can b e c arried backwa rd for 2 yea rs or fo rward for 20 ye ars to offs et t ax able income in a given ye ar. Improp er a ccumul ati on is the retention of earnings b y a busi ness for the purpose of enablingstockholderstoavoid personal income ta x es on dividends.
An S corporation isasmallcorporationwh ich, under Subch apter S of the Int ernal R evenueCode,elects tobetaxedasa proprietorship or a partnership yet retains li mi ted liabili ty and other benefits of the co rporat e form of or ganiz ati on. The reta ined earnin gs fi gu re r epr esents cumul ati ve amoun t of net i ncome thatthefirmhasnotpaidoutasdivi dends durin g it s enti r e hist or y. W it hout thi s capitalafirm cannotexist,asthereisno sour ce of funds wit h w hich to finance op erati on s.
It is the most im portant measure o f cashflowsbecauseit showstheexact amount avail able to all investors. Also, if youexpected tohavelossesforafewyears while the compan y was gett in g started, if youwerenot incorporated,andifyouhad outsi de income, the busi ness loss es could beusedtooffset yourotherincomeandr educe your tot al tax bil l. These f actors w ouldleadyoutonot incorporatethebusin ess. An alt ernati ve would be to organiz e as anSCorporation,if requirementsare met.
Need to set up an income statement and work from the bottom up. If dep re ciation doubled, tax able income would fa ll to z ero and tax es would be z ero. You shoul d prefe r to ha ve high er dep reci ati on c har ges and high er c ash f lows. It is not a secret that teaching process is quite difficult task and specially for this purpose we made Solutions Manual for Corporate Finance A Focused Approach 6th Edition by Michael C. Brigham will be able to see all answers for all exercises of the book.
By purchasing this Solutions Manual for Corporate Finance A Focused Approach 6th Edition you will get all answers for the exercises and tasks for the following chapters of the book:. Only logged in customers who have purchased this product may leave a review. Skip to content Selected: Solutions Manual for Corporate….
Previous Product. Instant download after payment. Need to set up an income statement and work from the bottom up. If depreciation doubled, taxable income would fall to zero and taxes would be zero.
You should prefer to have higher depreciation charges and higher cash flows. Net cash flows are the funds that are available to the owners to withdraw from the firm and, therefore, cash flows should be more important to them than net income. During the previous year, Computron had doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign.
Cochran was assigned to evaluate the impact of the changes. She began by gathering financial statements and other data. Note: these are available in the file Ch02 Tool Kit. What effect did the expansion have on sales and net income? What effect did the expansion have on the asset side of the balance sheet?
What effect did it have on liabilities and equity? Assets almost doubled. What do you conclude from the statement of cash flows? The firm borrowed heavily and sold some short-term investments to meet its cash requirements. What is free cash flow?
Why is it important? What are the five uses of FCF? Answer: FCF is the amount of cash available from operations for distribution to all investors including stockholders and debtholders after making the necessary investments to support operations.
Pay interest on debt. Pay back principal on debt. Pay dividends. Buy back stock. Buy nonoperating assets e. What are operating current assets? What are operating current liabilities? How much net operating working capital and total net operating capital does Computron have? Operating current assets are the CA needed to support operations. OP CA include: cash, inventory, receivables. OP CA exclude: short-term investments, because these are not a part of operations. Operating current liabilities are the CL resulting as a normal part of operations.
OP CL include: accounts payable and accruals. OP CA exclude: notes payable, because this is a source of financing, not a part of operations. What caused the decline in the ROIC? Was it due to operating profitability or capital utilization? The current ROIC of 0. This decline was due to worse operating profitability 0.
0コメント