Financial Week 6

Debt to Equity Ratio of 1.23 more than 1 reveals that more than half of assets are financed by debt.

(2) Is depleting your emergency savings / savings to free up your monthly budget by eliminating your car payment? Paying cash for your car may be the best option if the interest rate you earn on your savings is lower than the after-tax cost of borrowing. By educating yourself on fair car purchase price, appropriate interest rates, and negotiation tactics can save you a lot of money at the end.

EEC calculated the amount of time involved the anticipation of its cost ($3 million). The timeline in recovering their cost of investment ($2 million) initially for the foundation of this investment any profit made in the future of this investment will be justified as a profit for the company. If EEC can anticipate a fast return on its investment it is a profitable wise decision in making the investment financial, it is considered to be an easier way of formulating investments financially. On the basis of one year all cash flows is added together equal to the sum of $2 million originally invested, then it is divided by the annual cash flow of $500,000. The calculation of the payback period would equal four years. After this time frame any financial proceeds will be considered profitable for the company. I conclude that the timeframe is adequate in comparison of the investment in this worthwhile investment financial venture for the company.

1. Describe a real or made up but realistic situation that could cause you or someone you know to have to use money from a financial reserve. (3-6 sentences. 2.0 points)

My parents receive an earned income, meaning they work for it, unlike unearned income like child support and disability. My mom works as a Human Resources Director; she over sees all investigations in her facility and hires and fires people. My dad works as an Operations Sales Manager, so he over sees all of the different sales. They both have salary wages, so their income isn’t based on hours.

3. What are each of the financial statements commonly called in for-profit health care organizations and in not for-profit care organizations?

The debt/equity ratio for Boeing is provided in exhibit 10, 0.525, from where we can infer the weights of both debt and equity.

Please refer to Appendix 2 for other considerations for cost of equity calculations. Most firms use the Capital Asset Pricing Model (CAPM) to determine the cost of equity. The components that make up the CAPM include: the risk free rate, the beta of the security, and the expected market return of the stock. These values are all based on forward-looking data. The model dictates that shareholders require a return equal to the return from a risk-free investment plus an equity risk premium for bearing extra risk. Refer to Appendix 1 for a full breakdown of the CAPM formula.

In this case, an analyst can prove that BONIA CORPRORATE BHD use 39 percent debt. BONIA has $0.39 in debt for every $1.00 in assets. Therefore, there is $ 0.61 I equity for every $0.39 in debt. It also can prove that the company has enough assets to cover its debt to set long-term goals. It also creates a framework for its businesses to plan out a future long-term direction. Next, the company also definition a budget carefully identifies the necessary expenditure and R&D required for an investment project. It can turn bad from a good project since the expenditures are not carefully controlled or monitored. To prove the statement above, we can see that the company and the company is making sound business decisions, demonstrate accountability

| This assesses a company’s financial durability by examining whether it is at least profitable enough to pay off its interest expenses.

In order to calculate the cost of capital of Ameritrade we will use the Capital Asset Pricing Model. This model helps estimate the required rate of return of a certain investment for the given risk. In the case of Ameritrade, we can use this method by finding the most accurate risk free rate, market risk premium and asset beta. We can then find the return on assets by using the following formula:

The second ratio to evaluate is Debt-To-Total Assets Ratio, which is calculated as total debt divided by total assets. Halliburton’s debt-to-total assets of .43 has improved from the 2009 ratio of .47 and the 2008 ratio of .46 given it a stronger position in the industry. The low level shows very manageable debt allowing Halliburton to take advantage of the rising demand for oil and

3. Calculate the cost of equity capital using the CAPM, assuming a market risk premium of 5%.

helps a person to manage his personal finances and also to describe the three products of

We use the Capital Asset Pricing Model (CAPM) to determine the cost of equity. As