Hca Case Essay

Although the fair value of the investment was lower than the amortized cost, the credit rating had been upgraded from BBB to BBB+, and the investment does not intend to be sold. These evidence show that the bond is expected to recover, so no other-than-temporary impairment has occurred.

HH’s long term debt/asset ratio was decreasing from 2006 to 2010 and goes up a little bit to 14.82% as shown on the data. However, the total debt ratio were all time above 50% except year 2010. At the end of 2011, HH’s total debt ratio is 57.54% while the long term debt/asset ratio is 14.82%. This tells us that HH has a larger portion in short term debts/ liabilities than long term debts. And as we can see from the consolidated balance sheet,

This represents a 7% increase in stock price. Further, the additional leverage and return of excess cash to shareholders will significantly increase ROE. If the market determines that an 80% debt capital structure is feasible for BBBY, then we will expect further capital gains as investors applaud shareholder friendly policies and re-examine EPS estimates. However, if top line growth and same store sales growth continue to trend downward, investors may become skeptical of BBBY management’s ability to continue generating over 30% EPS growth, and thus question the ability of the company to service its debt in the future.

When combining the figures for ROE, ROA and the DuPont analysis it appears that the company is using leverage favourably. ROE is greater than ROA and assets are greater than equity. This is a positive sign for shareholders as it suggests a good investment return in a company that is managing its shareholder equity well (Evans & McDowell, 2009).

Based upon the firm’s low target leverage of 5%, low degree of operating leverage, and favorable credit history and financial outlook, the model assumes a cost of debt in line with AAA corporate debt at 7.02%. This estimate seems reasonable and sensitivity analysis shows a 1% decrease in the forecasted share price requires at least a 2.4% increase in the cost of debt.

This debt ratio is concerning and hints that the brewery may have difficulty paying its

this prompted the company was tagged with a Caa rating by Moody's based on an analysis of their financial liquidity, ability to manage maturing debt by refinancing, credit profiles, competition challenges, ownership, and management structure. although they can pull themselves out of this if they do get higher ratings if their liquidity, debt management or other financial metrics improve Financial Statements - Statement of Cash Flows The "key to increasing financial intelligence is" ... " Understanding the difference between profit and cash." ... " A healthy business requires both" (Berman & Knight, 2013, p. 133).

Target Corporation is having a very stable financial policy and dividend policy. From the historical financial data, Target had debt $11,044M, $11,202M, $10,599M, $17,471M, and $19,882M in the year of 2005,2006,2007,2008, and 2009 respectively. The long-term debt/equity ratio rises from 69.34% to 108%.

The ROE in 2014 has reached 15.8% which provides a solid improvement from 14% achieved in 2013. It has also been positively affected by ABC refinancing its debt facilities during 2014 which resulted in lower borrowing margins and increased term, as well as significant operational improvements achieved in line with company strategy focused on reducing costs and maximising margins. Adelaide Brighton’s ROA recorded only minor 0.2% improvement compared to 2013 with rate reaching 14.2%. The EBIT before significant items gains

The borrowings increased the RJR debts issued in 1984 bringing an A debt rating, therefore in financing the remaining $1 billion the below should be put into consideration:

According to this case, Singh wants to preserve an investment-grade on Deluxe’s rating. On Exhibit 6 we were provided with financial ratios and their association with the different investment-grade rating categories. These financial ratios can be used to compare the company debt flexibility. In the case it is specified that the manager in Deluxe pays close attention to the earnings before interest and taxes (EBIT) ratio to interest expenses, which is considered the EBIT-coverage ratio. From exhibit 6, we obtain the EBIT-coverage ratio for each rating categories, EBIT divided by the rating ratios will give us the individual interest expenses. We are going to assume that our EBIT is $359.42 million dollars (average.) We were not provided with an EBIT for the 2001-year but we have the forecasted EBIT for the next five years.

Because hospital management companies have participated heavily in acquisition recently, there is only a small amount of hospitals left to be acquired in the near future. HCA needs to continue to take over hospitals while they still can. If HCA focuses on its core operations and capital structure instead during this time frame, they will allow their competition to catch up in size while losing the main source of growth for the company which will compromise the company’s position in the long-term. Focusing on the firm’s short-term profitability instead of continuing growth will also affect the pricing of the firm’s equity. Up to this point, investors have been attracted to the consistent growth and quality image that the company is associated with. If the company ceases to acquire new hospitals, investors will become less faithful in the firm and their will be a subsequent drop in equity value. All in all, it is important for HCA to continue pushing forward as an industry leader in growth for the next 3-5 years and then focus on items such as operations and capital structure once their growth has been tapped out at its maximum

As always with advantages, disadvantages are present to. They include: an increase in financial risk. Despite the tax shield, the interest payment will result in a decrease to net income, and the bond rating could decrease to a AA status. The bond rating for a AAA is determined by a 18 Times Interest Earned Ratio. Once AMH increases their leverage to 30%, they will decrease their TIE to 17.50. Whereas, a AA is currently rated around a 9, further debt acquisition could result in a decrease of their bond rating and a decrease in value for stockholders. (Calculation: EBIT/Interest= tie ratio 922.2/52.,7=17.50)

In 2014 Hilton saw a $.005 cent decrease in their ability to meet their short term debts. While in the scope of the overall operation this decrease may not seem significant, when related to Hilton’s low current ratio of 1.107, this result does not provide Hilton much cushion in meeting its current liabilities. This may give pause to potential creditors who may question their ability to meet their obligations. This also indicates that Hilton may benefit from varying their financing activities in order to achieve maximum return, obtaining new equity, or, working toward reducing their liabilities.

Dell’s ROE and ROA have different patterns through the life of the case. Dell’s ROA has ranged from a high 18.2% in 1999 then gradually drop to 9.2% in 2008. Dell’s ROE has ranged from 43.7% in 1999 to 61.2% in 2008. Both ROA and ROE dropped significant amount in 2001. Dell’s ROE and ROA are well above the Federal Nominal 10-year T bills rates in all yeas and exceed HP’s ROE and ROA in all years. In 2001, HP’s ROE and ROA drop to the lowest point through the life of the case, because HP acquired Compaq and almost doubled size of the company.