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Final Application Project

Correlations between net income fcf and stock price

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Unformatted text preview: n from the Cooper Tires 2012 10-K, “Increased selling, general and administrative costs ($76 million), higher manufacturing costs ($7 million) and higher products liability charges ($6 million) partially offset the increases to the Company’s operating profit.” So as we can see in the chart displaying net income below, this increase in general administrative expenses ultimately had a negative impact on the company’s profit margins from 2011 to 2012. Sales and Earnings Projections: Annual earnings are projected to be $3.60 per share in the year 2014. In addition, the projected annual revenue for the year 2014 is estimated to be $4.6 billion. Judging from past estimates and actual earnings, the actual earnings tend to match or be greater than the estimated earnings. As a result I am fairly confident in the 2014 estimates based of analysts opinions. The rubber and tire industry continues to grow at a steady pace therefore providing great opportunities for Cooper Tire & Rubber Company. Free Cash Flow: The free cash flow of a company calculates the cash flow available for distribution to “investors.” In other terms, it is a measure of financial performance calculated as operating cash flow minus capital expenditure. It can be used to pay interest on debt, pay back principle on debt, pay dividends, buy back stock, or buy non- operating assets. This is very important because it allows the company to pursue opportunities to enhance shareholders value. As you can see Cooper Tires FCF has increased over the past 3 years with a significant leap from 2010 to 2011. This increase was a result of increases net income and in total net operating capital. Correlations between Net Income, FCF, and Stock Price: Cooper Tire & Rubb...
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