Unformatted text preview: 1 GB550: UNIT TWO FINANCIAL STATEMENT GB550: Financial Management Unit Two Financial Statements, Cash Flow, and Taxes Assignment Phyllis Rhyne-Bright February 19, 2015 Chapter 2 problem 2-8: Corporate Tax Liability 2 GB550: UNIT TWO FINANCIAL STATEMENT The Wendt Corporation had $10.5 million of taxable income. a. What is the company’s federal income tax bill for the year? Federal taxes are based on a percentage of taxable income. The formula for this business is: Taxes = 3,400,000 + .35 (10,500,000 – 10,000,000) = 3,400,000 + 175,000 = 3,575,000 (The federal income taxes for the Wendt Corporation) b. Assume the firm receives an additional $1 million of interest income from some bonds it owns. What is the tax on this interest income? The tax is based on the firm’s taxable income of 35%. Taxes = 1,000,000(.35) = 350,000 is the taxes on an additional $1,000,000 c. Now assume that Wendt does not receive the interest income but does receive an additional $1 million as dividends on some stock it owns. What is the tax on this dividend income? Because this is a dividend income the Wendt Corporation is taxed 30% of the 35% in the company’s tax bracket: (.30)(.35) =0.105 = 10.5% = 1,000,000 (1-0.105) 3 GB550: UNIT TWO FINANCIAL STATEMENT = 1,000,000(0.895) = 895,000 Taxes on this dividend income is = 1,000,000- 895,000 = $105,000 Chapter 3 Problem 3-6: Du Pont Analysis Gardial & Son has an ROA of 12%, a 5% profit margin, and a return on equity equal to 20%. What is the company’s total assets turnover? What is the firm equity multiplier? The company’s total assets turnover is can be found using ROA ROA = profit margin x total assets turnover .12 = .05 .12/.05 = x Total assets turnover = 2.4 Equity multiplier can be determined by ROE ROE = ROA x Equity multiplier .20 = .12x .20/.12 = x 4 GB550: UNIT TWO FINANCIAL STATEMENT The equity multiplier of the business is = 1.7 (1.66) Chapter 3 Problem: 3-11 Balance Sheet Analysis Complete the balance sheet and sales information in the table that follows for J. White Industries using the following financial data: Total assets turnover: 1.5 Gross profit margin on sales: (Sales – Cost of goods sold)/Sales = 25% Total liabilities-to-assets ratio: 40% Quick ratio: 0.80 Days sales outstanding (based on 365-day year): 36.5 days Inventory turnover ratio: 3.75 Partial Income Sales Cost of goods sold Balance Sheet Cash Account receivable Inventories Fixed assets Total assets Statement Information $600,000 $450,000 $28,000 $60,000 $120,000 $192,000 $400,000 Account payable Long-term debt Common stock Retained earnings Total liabilities and equity Calculations Below: Total Assets turnover ratio = Sales / Total Assets 1.5 = Sales / $400,000 $110,000 50,000 $140,000 $100,000 $400,000 5 GB550: UNIT TWO FINANCIAL STATEMENT Sales = $400,000 * 1.5 Sales = $600,000 Gross profit margin on Sales = Gross profit/Sales 25% = Gross profit / $600,000 Gross profit = $600,000 *25% = $150,000 Cost of Goods Sold = Sales – Gross profit = $600,000 - $150,000 Cost of goods sold = $450,000 Balance Sheet Total Liabilities to Assets ratio = Total Liabilities/Total Assets 40% = Total Liabilities / $400,000 Total Liabilities = $400,000 * 40% = $160,000 Total liabilities = Current Liabilities + Long term Liabilities 6 GB550: UNIT TWO FINANCIAL STATEMENT $160,000 = Current Liabilities + $50,000(Long Term Debt) Current Liabilities (Accounts payable) = $160,000 -$50,000 = $110,000 Inventory turnover Ratio = Cost of Goods Sold/Inventory 3.75 = $450,000 / Inventory Inventory = $450,000 /3.75 = $120,000 Days sales Outstanding = No. of days * Accounts Receivable Sales 36.5 = 365 * Accounts receivable / $600,000 Accounts receivable = 36.5 * $600,000 / 365 = $60,000 Quick Ratio = Current Assets – Inventory Current Liabilities .80 = Current Assets - $120,000 / $110,000 $88,000 = Current Assets - $120,000 7 GB550: UNIT TWO FINANCIAL STATEMENT Current Assets = $88,000 + $120,000 = $208,000 Current Assets = Cash + Inventory+ Accounts receivable $208,000 = Cash + $120,000 + $60,000 Cash = $28,000 Total Assets = Current Assets + Fixed Assets $400,000 Fixed Assets = $208,000 + Fixed assets = $400,000 -$208,000 = $192,000 Total Liabilities & equity = Total Liabilities + Common Stock + Retained earnings $400,000 = $160,000 + Common Stock + $100,000 Common Stock = $400,000 - $260,000 = $140,000 ...
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That simple process has since shifted and become complex in today’s media landscape. Media vehicles are fragmented, varied and require a depth of knowledge outside a typical business owner’s expertise or time. For those who retain agencies or have marketing departments, much of today’s media plan work is built on developing strategies that look at the gamut of options in the marketplace, and the most effective and cost-efficient strategies for reaching today’s consumers.
Media planning and buying is varied. My role at Wendt is to review, analyze and propose media campaign strategies that take into account the complex world in which consumers live. People are bombarded every day by advertising from every conceivable source.
On a daily basis, the average consumer is exposed to:
Newspaper ads, magazine ads, billboards, outdoor signs, point-of-sale signage, direct mail, coupons, receipt ads, grocery cart ads, gas pump advertising, bathroom stall ads, kiosk ads, shopping mall ads, airport waiting area ads, and doctor’s office and hospital waiting area video display ads. If you’ve been to a sporting event, you’ve seen mascots, stadium signs and programs. Even an event sponsorship such as a home and garden show would be considered an advertising vehicle.
Then there are other traditional elements.
Radio has always been a reliable, cost-effective medium that utilizes reach and frequency, which can vary depending on the station format and audience. There can be short or long radio ads, remote broadcasts, and even news and weather sponsorships.
Television and cable advertising is directed at different demographics and audiences. Placement in specific programs and sophisticated dayparting make sure that ads are seen by the right demographic at the right time to ensure maximum reach and frequency for cost-efficient placement.
The emergence of digital and social media and other technology has created a huge shift in today’s media placement. We include digital strategies in every advertising campaign to ensure the ad reaches consumers who might miss traditional media placements.
A well-thought-out digital media campaign, whether it’s to reach the masses or is a hyper-local millennial campaign, is the most complex planning and buying I do at Wendt.
In the digital world alone, there are a multitude of strategies and objectives.
Online consumers are targeted every moment with search query ads, programmatic ad placement, direct publisher preferred placement, in-content native advertising, email advertising, e-newsletters, short video animation, cross platform strategies, mobile ads and text messaging placement. They’re all there – from your desktop, to your tablet to your mobile device.
Wendt also considers placement strategies such as geo-fencing, geo-targeted, demographically targeted placement, contextual and related-content placement. Recently, the advent of streaming ads on platforms such as Pandora, Hulu and Spotify, which include image ads and video, has changed the way Wendt develops ads for our campaigns.
Digital strategies such as in-newsfeed social media ads and custom audience targeting are ways we find consumers using the algorithms developed by Facebook and Google. You’ve all experienced it. When we utilize retargeting, your clicks on images and ads during your search activity allows advertisers to find you and “retarget” your behavior. You’ve become a viable prospect as “in-market.” Try looking for a hotel or airline ticket the next time you are on your computer and you’ll see you’re now part of a retargeting campaign.
In the early days of The Wendt Agency, media buying was simpler. Today it is more complex – customized and tailored to fit the budgets and demands of our clients. The ever-challenging task of finding and placing a mix of the best media tactics is a process we dive into every day to make sure our clients are reaching their target market.