Cash Connection: Are Its Payday Lender Strategy and Its Business Model Ethical

4 (b) Evaluate the argument that managers controlling large companies might follow policies which do not necessarily maximise the profits of the owners.

Financial statements provide users with information for evaluating an entity’s performance and financial status and thus help them to make informed decisions in their dealings with the entity. To assess these aspects, the users have various tools that they can employ. For instance, ratio analysis helps the users to detect any significant changes in an entity’s operating performance within a given period and thus indicate the risks and opportunities of the entity being reviewed (Helfert, 2001). Further, calculating ratios of companies in the same industry can help to highlight the companies that are performing below the industry average and thus help investors to choose the best company to choose from among alternatives. Apart from investors, ratio analysis can also help creditors evaluate a company’s liquidity and thus assess its ability to pay its debts on time (Helfert, 2001). Other ratios such as efficiency ratios can help managers to determine optimal uses of the entity’s assets and thus work towards enhancing efficiency. Apart from ratio analysis, horizontal analysis can also be used to reveal the trends of individual items in an entity’s income statement and balance sheet and thus help to unearth the items that may have affected the entity’s performance during a specific period. The horizontal analysis and ratio analysis of the financial statements of Starbucks Corporation that is the subject of this paper indicate that

One cold morning Sam Black woke up with aching chest pain. Troubled by this new condition he went to see his Heart Doctor. Little did Sam know that hours later he would be lying on the operating table in route for a triple bypass surgery. The surgery went as planned, but it was not the last of them. Sam was sent to many specialists and rehabilitation centers, building a large bill, which they had no money to pay them with. He still pays several grand a year for the medication he is prescribed. Years after the operation Sam and his wife, Elsie, have narrowly escaped foreclose, however the most problematic debt they have is the hundreds of small term loans with interest rates in the triple digits. Elsie once said in an interview regarding

Appendix-I shows, Target and its other two competitors is less dependent on assets to finance debts and their debt ratios are much lower than industry average. Therefore, Target may have low risk of financial leverage usage, stronger equity position and unlikely to go bankrupt. The data shows debt ratio of Costco has drastically dropped in 2013. This might have occurred by either increase of assets or by decrease of debts. The Debt-to-equity ratio shows that Target has a larger number of expenses to finance its assets compared to its competitors and industry average. In 2013, Target was in a position where for every roughly $8 debt it has $1 equity to payback. In the industry Costco had lower and decreasing Debt-to-equity ratio in the industry. But compared to Costco and Target, Wal-Mart is in better position with a quite mid Debt-to-equity ratio. The Market debt ratio of industry shows completely different scenario. Here, Target had high and steady ratio which indicates low risk for debt-holders with high market value. Wal-Mart had lower market debt ratio compared with other two competitors and represents high risk for investment. On the other hand, Costco was in better position in 2011, but higher the following years as the value gradually dropped. In the context of investors, the company of retail or discount stores industry should be able

This tells how much money is left over after a company pays for its capital expenditures from operations. Some analysts assess the quality of a company’s earnings by noting the how consistently the amount of cash flows from operating activities is greater than net income.[3]

Professional financial advice should be regulated by the government before they get a loan. According to Scott Gilmore’s report: “there are more than 1,400 payday-loan outlets across the country. They primarily target people with low to moderate income and no assets.” Charging murderous interest for low income people who does not have financial base is not just morally wrong it will put them deeper into a hole. The interest rate for the payday loan is over 500%, which means Scott will end up losing 5 times of the amount he borrowed from payday loan at the end of the year. This is a significant problem, for society. Since low to moderate income people are borrowing money from payday loan. Polarization of wealth will become more serious if the

In addition, a case study on three different business and the financial ratios that can be calculated from the cash flow statement are also presented to show how each ratio varies by company. Lastly, thoughts on the three companies and which may encounter cash flow problems is also discussed.

If the company unlawfully overcharges clients on payday loans, there could be lawsuits from those clients. Knowing that there could be potential lawsuits from providing payday loans, it should be taken into consideration while the two sides come to a consensus. This would bring a lot of negative attention towards the company, which would ruin their reputation. This is what happened to a well-known payday loan company in Ontario, Canada called, Cash Store Financial Services Inc. They let their clients exceed the amount that they are allowed to borrow and added additional fees to opening credit or debit cards instead of hiking up interest rates above the maximum amount. They owed $10 million to their customers, and in 2014, they

The debt-to-capital ratio gives users an idea of a company's financial structure, or how it is financing its operations, along with some insight into its financial strength. The higher the debt-to-capital ratio, the more debt the company has compared to its equity. Star River has always depended much on debt for its financing and the trend shows this ratio may get higher in future. Star River, with high debt-to-capital ratios, compared to a general or industry average, may show weak financial strength because the cost of these debts may weigh on the company and

Landry’s Debt to Asset ratio also increased from year 2002 to 2003. In 2002 Landry had a debt to asset ratio of 0.39. In 2003 Landry’s debt to asset ratio increased to 0.45. While both numbers are acceptable and considerably low, the increase from 2002 to 2003 could influence potential investors to not invest in Landry’s stock. This increase also suggests that Landry’s debt also increased from 2002 to 2003. Overall, while there was a slight increase from 2002 to 2003 Landry’s still had a good debt to asset ratio. We think that a contributing factor to the debt

The financial statements included tend to combine cash and marketable securities into a category labeled “cash and cash equivalents”. If the cash ratio is recalculated using this value instead of simply cash than the ratio improves to 1.10, which shows much stronger liquidity capabilities.

If the firms funding requirements are larger than their retained earnings, they must issue debt as this is preferred to issuing equity. Based on this theory, a firm’s financing policies could be viewed as signalling management’s view of the firm’s stock value (Wang & Lin 2010).Myers and Majluf (1984) also add that if firms issued no new securities but only used its retained earning to support the investment opportunities, the information asymmetric could be resolved. This suggests that issuing equity turn out to be more expensive as asymmetric information insiders and outsiders increase. Large firms should then issue debt to avoid selling under priced securities. As the requirement for external financing increases, businesses will work down the pecking order, from safe to riskier debt, perhaps to convertible securities or preferred stock, and finally to equity as a last resort. Each firm's debt ratio therefore reflects its cumulative requirement for external financing (Myers 2001).The pecking order theory clarifies why the bulk of external financing comes from debt. It also describes why organizations that are more profitable borrow less: since their goal debt ratio is, low-in the pecking order they do not have a goal since profitable firms have more internal financing available.

Furthermore, financial information will be disclosable to the Manager, Investors, and Creditors as they have the ratio analysis. This is the most important analysis to the Investors because they will know the financial positon of the business and make decent decisions. Also, this is important for Creditors because they will get an idea on whether the business will be able to pay off the Debt. The disadvantages of Accounting Ratio, it does not provide overall business performance and it is only analysed in figures. Accounting Ratio is a least useful tools because it does not analyse the previous performance where the business is mainly concern about future information. Ratio Analysis is only made as a prediction to indicate on whether they are making the profit or loss as an overall business performance.

Starcorp Industries were developing its proposal for the multi-billion dollar contract, and due to the company’s depleting cash reserves recently laid off a number of ‘non-essential’ employees over the last couple of months. Starcorp Industries have landed one of the contracts and in the process, purchased an additional 500 employee engineering firm to beef up the engineering staff and expand their customer base. Following the acquisition of the engineering firm Starcorp Industries terminated two-thirds of the administrative staff. As a result of the acquisition and the current and former lay-offs employee trust in the firm have diminished and a number of top engineers have left to work for the competition. Starcorp Industries needs a leader to help turn the company’s current position into a successful one, while working to complete the contract they received.

4. How does this case illustrate how strategic intent needs to be matched by both organizational capability and managerial competence; and show how such