Abstract This paper compares and contrasts the capital asset pricing model (CAPM) and the discountedcashflow (DCF) model in valuing common stock. The paper holds that, because of the complexity and importance of valuing common stock, the above techniques have been devised over time to accomplish this task. It points out that CAPM focuses on inputs to calculate stock prices that are external to the firm while the DCF model focuses on internal factors. Also, CAPM is concerned with growth rate, while DCF is concerned with estimated returns. The paper concludes that both models are important to investors and expanding companies.
From the Paper "For a firm that is expanding, it is difficult to establish a proper growth rate for the DCF. If past growth rates in earnings and dividends have been relatively stable, and if investors appear to be projecting a continuation of past trends, then the growth rate may be based on the firm's historic growth rate. However, if the company's past growth has been abnormally high or low, either because of its own unique situation or because of economic fluctuations, then the growth rate has to be estimated in some other manner."
Abstract This paper reviews the statement of cashflows for Papa John's Pizza and Dominos Pizza, and identifies how much cash was generated or used by operating, financing and investing activities. Using the statement of cashflows, the paper identifies some of the significant internal events that affected the company's cash position. The paper describes the changes in revenues and net incomes over the company's solvency, liquidity and profitability.
Tags: statement of cashflows, liquidity and solvency, ratio analysis, comparative analysis
Abstract This paper is on cashflow for a small software company, noting the particular requirements of such a company and the way cashflow can be used to make decisions about the company.
From the Paper "Managerial accounting entails various specific elements of cash flow, but these and their effects may differ from one type of business to another. Different types of cash flow have to be considered for a software company, based on the business requirements, workforce, and business environment. One analyst notes that "growing software companies track the actual cash going in and out of the business very closely" (Crankshaw para. 7). Crankshaw also notes that in a software company, engineering, marketing, and operations often make product-related decisions "that not only strengthen the company's infrastructure and its competitive advantage in the marketplace, but that improve cash flow as well" (Crankshaw para. 3). The reason for this is because there are many non-cash events that can have a negative effect on profitability that can thus distort the image of the cash flowing through the business."
Abstract This paper describes and analyzes some of the different methods for appraising the value of a company that is being sold. The paper looks specifically at methods such as net-asset valuation, price-to-earnings ratio and discountedcashflows. It also describes the goals and the conditions surrounding the selling business, as well as the goals of the purchasing company.
Table of Contents:
Net-Asset Valuation
Price-To-Earnings Ratio
DiscountedCashFlow Conclusion
From the Paper "The U.S. economy is arguably the most diversified in the world, and this allows for many different types of businesses to flourish. Companies that supply raw materials, manufacture goods, distribute items, or provide services are all part of the American economic landscape, and these businesses are regularly bought and sold. Because of the variety of businesses that can be purchased or acquired, there are several different methods for arriving at a proper valuation. Three of the common valuation methods are net asset, price-to-earnings ratio, and discounted cash flow. Each of these methods is appropriate for given situations - net asset, for example, may be the only reliable way to valuate a business that is focused on assets, such as real estate. However, all three of these methods have their limitations. Price-to-earnings, for example, rewards stock speculation and can lead to overpaying. But, taken together, these three valuation methods provide a useful suite of tools that can handle many different situations."
Abstract This paper explains the process of cashflow management. The author discusses the proactive role that the company treasurer can take in managing the credit and collection function. The paper describes the job of various employees in financial management.
From the Paper "According to Lucy Reuben writing in "Black Collegian" every organization, private or public, large or small, depends upon a management team that generates cash inflows sufficient to cover required cash outlays. Corporate financial management covers a diverse range of responsibilities related to the procurement and use of cash flows. These responsibilities are generally divided between a treasurer and a controller who both report to the vice-president of finance. The controller handles issues such as capital budgeting profit and loss analysis and working capital management. The treasurer's side ..."
Abstract The paper provides a brief financial overview of Wal-Mart. The paper then utilizes discountedcashflow valuation techniques, relative valuation techniques, cost of capital and capital budgeting in order to determine if Wal-Mart's stock is over-valued, under-valued, or just right. The paper shows how, irrespective of the quantitative analysis employed, the calculated stock value for Wal-Mart falls within the threshold and the current stock price is close to current stock value.
Outline:
Introduction
Brief Financial Overview of Wal-Mart
Valuation and Rates of Return
Free CashFlow Model
Dividend Discount Model
Valuation Techniques
Cost of Equity
Capital Budgeting and Risk
From the Paper "A stock is generally considered over-valued if the price-earning ratio is high relative to the rate at which a company's earnings are likely to grow. The converse holds true for an under-valued stock. Because of the complexity and importance of valuing common stock, various techniques for accomplishing this task have been devised over time. The techniques that will be used encompass: 1) discounted cash flow valuation techniques, where the value of the stock is estimated based upon the present value of some measure of cash flow, including dividends, operating cash flow, and free cash flow; and 2) the relative valuation techniques, where the value of a stock is estimated based upon its current price relative to variables considered significant to valuation; 3) cost of capital; 4) capital budgeting."
Abstract This paper discusses the importance to a company of forecasting its cashflows. It begins by providing an explanation of what this entails and then describes the steps for a company to perform an efficient cashflow forecast. The paper concludes with examples of companies that managed to perform efficient cash forecasting and discusses the positive effects this had on these companies.
Table of Contents:
Introduction
Reasons To Forecast CashFlows How To Perform An Efficient Cash Forecasting
Success Stories
From the Paper "Compare cash forecasts to business plan outputs. By doing so, a company will take under consideration current business trends, rather than historical results. Usually, extrapolation based on historical results needs to be adjusted to all changes in the business environment. That is why comparing the cash forecasting results with those from the business plan can be useful. There is also the advantage of adjusting the results from the business plan to those from the cash forecasting by engaging the business units in this process, if the gap between the two methods is large."
"Last, but not least, the comparison is important to check the current business status against the forecasted results. This is particularly important for business units as they deal with the operational part of the company's activity and therefore are responsible for the operational results."
This paper is a research proposal on the risk and opportunities of working capital, working capital management, cash conversion cycle and credit management, among others.
Abstract This paper is a research proposal that discusses Lawrence Sports, a company that manufactures and distributes sports equipment and protective gear. Lawrence has a cashflow problem because its largest customer, Mayo Stores, is not paying on time. This paper benchmarks other companies to determine an alternative solution which will enable the company to improve its overall cashflows. The paper introduces research that assesses the risks and opportunities of working capital, working capital management, cash conversion cycle, credit management, and short-term financing/debt reduction to prepare for long-term opportunities, cashflow, and identifies the best practices in working capital management. Also, the paper has a large appendix with information from multiple companies.
Outline:
Abstract
Introduction
Conclusion
References
Appendices
Borders
General Electric
Magna Entertainment Corporation
Fleetwood Enterprise
Wal-Mart
Starbucks
Graham Manufacturing
Dell Computers
From the Paper "In addition to the other working capital issues identified, Lawrence Sports also is experiencing issues with its cash conversion cycle. Currently, Lawrence is using short-term financing in the form of cash from operations and a bank line of credit to not only finance short term assets such as inventory but also ongoing operations. Doing so places a significant pressure on the company to convert cash quickly. Benchmarking two other companies who have successfully controlled their cash conversion cycle could lend insights to Lawrence on how its CCC may be improved.
"Graham Manufacturing had a CCC of 134 days in 2004. By reducing the amount of time to collect 42% in 2007 and 37% in 2006 as well as increasing the amount of customer deposits prior to delivery of product Graham reduced its CCC down to 46 days by Q1 FY08. Following Graham's example Lawrence Sports could reduce its CCC by requiring Mayo, its largest customer, to pay more than 20% at the time of order. Additionally, Lawrence should focus on faster collections just as Graham did successfully. Such a plan could take the form of discounts for prompt payment or negotiate an interest charge for delayed payment."
This paper is a research proposal on the risk and opportunities of working capital, working capital management, cash conversion cycle and credit management, among others.
Abstract This paper is a research proposal that discusses Lawrence Sports, a company that manufactures and distributes sports equipment and protective gear. Lawrence has a cashflow problem because largest customer, Mayo Stores is not paying on time. This paper benchmarks other companies to determine an alternative solution which will enable the company to improve its overall cashflows. The paper introduces research that assesses the risks and opportunities of working capital, working capital management, cash conversion cycle, credit management, and short-term financing/debt reduction to prepare for long-term opportunities, cashflow, and identifies the best practices in working capital management. Also, the paper has a large appendix with information from multiple companies.
Outline:
Abstract
Introduction
Conclusion
References
Appendices
Borders
General Electric
Magna Entertainment Corporation
Fleetwood Enterprise
Wal-Mart
Starbucks
Graham Manufacturing
Dell Computers
From the Paper "In addition to the other working capital issues identified, Lawrence Sports also is experiencing issues with its cash conversion cycle. Currently, Lawrence is using short-term financing in the form of cash from operations and a bank line of credit to not only finance short term assets such as inventory but also ongoing operations. Doing so places a significant pressure on the company to convert cash quickly. Benchmarking two other companies who have successfully controlled their cash conversion cycle could lend insights to Lawrence on how its CCC may be improved.
"Graham Manufacturing had a CCC of 134 days in 2004. By reducing the amount of time to collect 42% in 2007 and 37% in 2006 as well as increasing the amount of customer deposits prior to delivery of product Graham reduced its CCC down to 46 days by Q1 FY08. Following Graham's example Lawrence Sports could reduce its CCC by requiring Mayo, its largest customer, to pay more than 20% at the time of order. Additionally, Lawrence should focus on faster collections just as Graham did successfully. Such a plan could take the form of discounts for prompt payment or negotiate an interest charge for delayed payment."
Abstract This paper examines why a company needs to have a good cashflow. It explains that to protect themselves from risk, businesses can use a wide range of sources of funds in order for them to be able to finance their trading activities. Although not all of them are in cash, the paper explains that they have the effect of improving cashflow on both short and long term; most sources of capital take the form of assets used by companies in order for them to function.
From the Paper "Budgeting is the process through which the resources and responsibilities of each center of activity are set. The budget is the prediction of the resources and expenses required in order for the objectives of the corporation to be fulfilled, respecting certain profitability conditions. The starting point may be last year's budget or, in some cases, Zero Budgeting may be employed (starting from scratch). Budgeting greatly increases the cash flow, if used correctly.
Manpower management is also an important method of improving cash flow. For instance, some workers do not require permanent contracts, work can be subcontracted or transferred to temporarily contracted workers, which has the effect of reducing expenses with pensions, insurance, holiday pay etc."
Abstract This paper explains that investors can evaluate the desirability of investing in United Parcel Service (UPS) and Federal Express Corporation (FedEx) by examining their financial statements, such as the cashflow statements and the annual reports, which these publicly traded companies are required to file with the Securities and Exchange Commission (SEC). The author points out, when evaluating cashflow statements, it becomes apparent that many internal events affect the cashflow position of the organization such as an increase of expenses rising in comparison to the previous year in gas prices. The paper relates that analysis ratios, such as Current Ratio, Return on Sales, Earnings per Share (EPS), Debt Ratio, and Price to Earnings (PE) Ratio, are helpful in determining a company's solvency, liquidity and profitability; both companies are liquid and solvent because both companies' current assets (cash, accounts receivable, inventory and short-term investments) outweigh their short-term liabilities. Chart.
Table of Contents
The CashFlow Statement - UPS
CashFlow Statement - FedEx
Internal Events - UPS
Internal Events - FedEx
Revenue and Net Income
Financial Analysis Ratios
Discussion
From the Paper "The Income Statements generated by these organizations also help any outsider gain insight into these organizations' revenue and net income statistics. United Parcel Service Inc. conducts its financial statements through a calendar year, starting on January 1 and ending on December 31. Over the last couple of years, the company's revenue has increased by $5.31 billion. December 31, 2002, finished with an amount of $31,272,000,000 in total revenue, followed by $33,485,000,000 on December 31, 2003. The most recent revenue is of $36,582,000,000 for the end of last year, December 31, 2004. It would be extremely welcoming for UPS to maintain all of its revenue; however, there are other expenses and costs that the organization must pay accordingly, which leads to the anticipated number of Net Income. UPS' Net Income continues to grow along with its revenue. On the December 31, 2002, UPS' books show a net income of $3,182,000,000."
Abstract This paper explains how a company with $500,000 budget can meet its financial goals, management goals and supplier's goals.
The paper outlines the steps that must be taken in order to manage this budget and meet its intended goals, focusing on formulating a preliminary budget estimate, cooperation and coordination with vendors, and cashflow management. The paper lists a summary of the goals to be achieved by managing the budget and includes a chart of an example of a 90 day cash budget
Table of Contents:
Summary
Managing Budgets
Converting to a New System
Management and Vendors
CashFlow Management
Presentation to the Management
From the Paper "For a company that has a budget goal of say around $500,000 it needs to first formulate a preliminary budget estimate that would help identify the disbursement of lump sum amount such as payments to creditors, payment to suppliers, taxes, payroll, advertising costs, interest and operating expenses. These will give a rough estimate of the overheads and the fixed costs. Secondly, it needs to evaluate its cash flow elements such as collections on accounts receivables, cash from sales, payments of accounts payable, cash expenses, dividend (if any) and payments of long term debts."
Abstract This paper discusses the importance of budgeting and financial forecasting for an organization. It looks at inventory management, cashflow, cash budgeting and financial forecasting and the role that managers must play in these areas to prevent loss of capital. The paper relates these areas to specific companies and how forecasting is used to improve the competitive advantage of each company.
Table of Contents:
Abstract
Inventory Management in Travel and Leisure, Boeing/Honeywell
Inventory Management in Travel and Leisure, Royal Caribbean
The Need to Implement Risk Management Strategies, Oriental Fastener Co.
Risk Management Strategies to Realize Business Goals and Opportunities Fluor Corporation
Parker Hannifin Corporation, Securitization by
FINOVA Group Inc., SecuritizationSix Disciplines L.L.C., National Association of Realtors, Cash Budgeting
Lewis Homes Management Corp, Cash Management Process
From the Paper "Managing risk, cash flow, keeping good relationships with financial institutions, and managing inventory are all critical aspects of running a successful organization. With so many aspects to take into consideration it can be overwhelming for many organizations to keep up with the constantly changing business environment. Advancements in technology give organizations the opportunities to take advantage of new tools in order to become leaders in their industries. Those organizations with management who fully understands how to use the tools and technology provided will stay ahead of the competition."
Abstract The following paper consists of an analysis performed on an example cashflow sheet. A summary of work performed and conclusions that can be drawn from this analysis are included. A fictitious company, Rainbow Paint Company, is used as a case in point with regards to cashflow and operations and profits in the future.
From the Paper "The statement of cash flows is a tool used to assess the capacity of a firm to achieve goals such as generate cash flow from operations, maintain and expand operating capacity, pay dividends to shareholders, pay debts including interest when due, generate future profits. The cash flow statement examines the flow of cash rather than net income.
The cash flow statement is divided into three sections Operating Activities, Investing Activities, and Financing Activities. Each section examines items, which increase cash and things that decrease cash".
Tags: shareholder, ration, sales, assets, shares, company, profit, income
Abstract This paper explains several accounting concepts including the relevance of each section of the statement of cashflows, as well as the importance of the balance sheet to financial analysis. The paper also explores importance and relevance of the explanatory notes to companies financial statements.
From the Paper "The statement of cash flows presents information about cash inflows and cash outflows. The statement separates cash flows into three distinct activities which are operating activities, investing activities and financing activities. The combined net increase or decrease in cash and cash equivalents from these three sections of the statement of cash flows is reported near the end of the statement of cash flows, under the heading "Net Increase Decrease in Cash and Cash Equivalents for the Period". Cash flow from operating activities reflects cash inflows and outflows from..."
