Corporate Finance 17

Corporate Finance 17 - First, forecast income statement and...

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Final Notes Thursday, January 13, 2011 6:28 PM Ratios and Forecasting Ratios Liquidity: how fast assets can be turned into cash (can they meet short term obligations?) Current Ratio: Current Assets/Current Liabilities (want bigger than 1) Acid Test: (stricter than current) Efficiency Ratios: how effectively management runs the firm ( short term ) Days of Inventory= Inventories/cost of goods sold/365 Days Receivable= Accounts Receivable / (revenue/365) Days Payable Financial Leverage: how much of long term assets are funded by debt vs. equity Long Term Debt to Equity=LT Debt/Equity EBIT/Interest Profitability ROE= net income/common equity
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Unformatted text preview: First, forecast income statement and net profits Next, forecast total assets on the balance sheet. TA=TL+OE B/S "PLUG" Total Assets Equity= Old equity + profit Total liabilities + OE Forecasting Historical method % of sales method Financial ratios Total Assets =Total Liabilities + OE WACC, CAPM Weighted Average Cost of Capital Where: Re = cost of equity Rd = cost of debt E = market value of the firm's equity D = market value of the firm's debt V = E + D E/V = percentage of financing that is equity D/V = percentage of financing that is debt Tc = corporate tax rate Capital Asset Pricing Model...
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This note was uploaded on 05/23/2011 for the course BUSI 408 taught by Professor Croce during the Fall '08 term at UNC.

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Corporate Finance 17 - First, forecast income statement and...

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