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413 ch 9 -12 - Ch 9 cont Cs of credit Capital character...

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11/8/10 Ch 9 cont C’s of credit – Capital , character, collateral, conditions, capacity Number one rule of dealing with banker – be honest – will build standing and will understand and help you when you need it – be up front and on top of things (share bad news) Ask banker for ideas and advice Leasing – tax advantage to lessee – type of available financing – most available for fixed type assets – buildings, machinery, rolling stock, etc. – leasing company owns the asset and loans it to the lessee’s company – good for lessee because they can pay lower payments and under current US accounting rules the lease and depreciation don’t have to go on the company’s balance sheet Capital structure decision – mix of debt and equity – different for every company – reflection of managements willingness to accept risk – acceptable to use debt if they have a stable sales and earnings tax record – stable cash flows – will increase risk profile of the business because more of the cash flow in the future is going to be needed to service the debt Complication of dividend policy – most private companies are considered “S corporations” - small businesses don’t pay taxes, then owners pay tax on the earnings PERT – Project evaluation and review technique 1 what is our goal? Make sure everyone agrees up front 2 what analytical steps will we take to analyze this project 3 gather info 4 do the analysis 5 make a decision 6 implement decision 7 post audit Ch 10 Business Valuations How do you value a company? Public is market cap private is more difficult, can be valued on assets, cash flows or whatever price omeone is willing to pay for it Why value? -Insurance- valuing assets -Takeover – buy stock – acquire the company but don’t want to pay too much -Ego -Measure growth -Estimate Goodwill -Bankruptcy -Enterprise Value – borrow with the company as collateral -Potential Investment -Estate division -Partnership Issues
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How to value?
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