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1. Effects of increase in interest rates on bonds

Effects of increase in interest rates on bonds

As interest rate rises, the value of the existing bonds goes down

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2. Give the reasons why a company may want to go public

Give the reasons why a company may want to go public

Cash in-done when a company is seeking funding

Cash out-done when existing shareholders take the opportunity to sell their shares and the company doesn't necessarily raise further finance

The desire to have shares which  can act as currency in

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3. Explain the three basic forms of EMH

Explain the three basic forms of EMH:

 

The efficient market hypothesis assumes that markets are efficient. The efficiency can be categorized into three basic levels:

Weak form-it implies the market is efficient reflecting all the market information. This hypothesis assumes that the rate of return is independent; past rates of return have no effect on future rates

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4. State and explain the expected EPS and P/E ratios for a start up business,growth company,mature and declining company

State and explain the expected EPS and P/E ratios for a start-up business, growth company, mature and declining company

Mature companies

   P/E ratio is medium/low because growth is medium or low

   EPS is very high-there is stagnant/declining revenues creating negative margins

Declining businesses

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5. The following information related to Omega general wholesalers ltd for the year ended 31.12.13 Beginning of year in millions end of year in millions Inventory 4000 4600 A/Cs receivable 1200 1600 A/Cs payable

The following information related to Omega general wholesalers ltd for the year ended 31.12.13

                                                                           Beginning of year in millions                        end of year in millions

Inventory                                                          4000                                                                  4600

A/Cs receivable                                               1200                                                                  1600

A/Cs payable                                                   1000                                                                  600

 

Sales in the year were $23billion, of which 60% were on credit. Cost of goods sold to sales ratio was 85:100.Cash purchases were 30% of credit purchases.

Required:

Calculate the cash cycle for omega during the year 2013

What steps can be taken to reduce the operating cycle?

Working

Cash cycle=operating cycle-payable period

Where operating cycle=inventory period+ receivable period

Find inventory period

Inventory period= COGS/Ave. inventory

COGS=85/100*23b=19,550m

Inventory turnover=19550m/ ((4000+4600)/2) =4.5465

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