Judgment case 16-10 deals with issues related to a company’s debt to equity ratio and the effects that long-term deferred tax liabilities have on the debt to equity ratio. In this case, parts of the 2011 and 2010 balance sheets of Macy’s, Inc. are given as well as the debt to equity ratio from 2011. The main question that is presented in this case is whether or not long-term deferred tax liabilities should be included or excluded from the calculation of a company’s debt to equity ratio. The debt to equity ratio is used in determining the financial risk of a company (Spiceland, Sepe, & Nelson, 2013).
Requirement 1: What is the rationale for the argument that long-term deferred tax liabilities should be excluded from liabilities when computing
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When companies have more debt, there is more risk involved. Since deferred tax liabilities increase the amount of debt reported by a company it’s understandable then that they would want to exclude it. Regarding deferred tax liability, “some analysts will argue that it should be excluded, observing that in many cases the deferred tax liability account remains the same or continually grows larger,” believing that future tax payments aren’t required (Spiceland et al., 2013, p. 978).
Requirement 2: What would be the effect on Macy's debt to equity ratio of excluding deferred tax liabilities from its calculation? What would be the percentage change? Excluding the deferred tax liabilities from Macy’s debt to equity ratio calculation would decrease the overall debt to equity ratio. Macy’s originally reported a debt to equity ratio of 2.7 at the end of 2011. If however the deferred tax liabilities were left out of the equation, the debt to equity ratio would then be calculated by removing the $1,245 of deferred tax liabilities from the total liabilities and then dividing by the total shareholders’ equity: ($15,101 – 1,245) / $5,530 = 2.51. The smaller ratio may not be that significant of a change, but it still helps bring it down to try to present a more favorable view of the
The debt carries an obligation of payment to creditors while equity provides an opportunity for profits for shareholders. Therefore, all revenues from Target and Walmart operation must go to pay creditors first; shareholders retain whatever remains after accounting for all expenses, including the cost of operations, taxes, etc. Since shareholders face more risk than creditors, shareholders generally expect a return on their capital that is higher than the returns that creditors expect on their capital. However, Walmart and Target cost of capital is thus a mixture of returns to creditors and returns to equity provider (Trainer, 2017).
Debt to Equity ℎℎ ′ 9,771+1,885 Dividend Payout Inventory Turnover = 0.069 Working backwards from the income tax expense, we estimate income tax rate to be 34%. NOPAT is then Operating profit taxes, or 3,137*(1-0.34) = 0.319 Average
b. What book-tax difference associated with its goodwill should RC report in year 2? Is it favorable or
Date: Name: ID: Answer the following Questions: 1. Tower Inc. owns 30% of Yale Co. and applies the equity method. During the current year, Tower bought inventory costing $66,000 and then sold it to Yale for $120,000. At year-end, only $24,000 of merchandise was still being held by Yale. What amount of inter-company inventory profit must be deferred by Tower? A. $6,480 B. $3,240 C. $10,800 D. $16,200 E. $6,610 2. All of the following statements regarding the investment account using the equity method are true except A. The investment is recorded at cost B. Dividends received are reported as revenue C. Net income of investee increases the investment account D. Dividends received reduce the investment account E.
2) In 2013, Firm A paid $50,000 cash to purchase a tangible business asset. In 2013 and 2014, it deducted $3,140 and $7,200 depreciation with respect to the asset. Firm A’s marginal tax rate in both years was 35 percent. Compute Firm A’s adjusted basis in the asset at the end of each year. (part b)
In the human services field it’s likely workers will have contact with the court and legal system. The differences in the human services profession and the legal systems can become challenging for workers. Such as dissimilarities in prerogatives and values, prove this challenge for human services workers (Kennedy, Richards, & Leiman, 2013). Human service work practice requires an understanding of social policy’s impact in specific areas. As practitioners grasping how theories concerning fundamental principals of social policy have implications for human services agencies and for the individuals who are the users of the services (Carson & Kerr, 2014). This paper will discuss a case observed at Beenleigh Magistrates Courthouse. It will also look at the multiple roles and responsibilities of Human Service professionals appearing in the legal system, as well as the importance of ethical writing and possible tensions between the legal system and human services profession.
Decide which witnesses could support the prosecution’s case and which witnesses would support the defense’s case. How does Search and Seizure relate to the B.I.G. case?
Did the trial court err when it did not deem as admitted facts the allegations made by the Defendant in his Seconded Amended Complaint in accordance with MD Rule 2-323(e), which caused a violation of the Defendant’s fourteenth amendment rights?
The appeal at bar challenges significant legal errors committed by the district court when it erroneously create a new category of law, and misinterpreted federal law to such an extent that it would impose significant burdens upon school districts nationwide if allowed to stand, and incorrectly applied statutory law resulting in an inaccurate finding that the Appellant did not comply with its obligations under the IDEA. The district court’s findings that K.W. is not a parentally-placed private school student and the district courts creation of a new category of private school placement for students with disabilities under the IDEA was inappropriate. In this case, Parent made clear that she did not intend to enroll K.W. in the public school system due to her preference that K.W. attend a private school. In reviewing the district court’s decision, the court erroneously determined that K.W. was not a parentally-placed private school student. This Court has been asked to establish that K.W. was a parentally-placed private school student as defined by 34 C.F.R. § 300.130.
Ms. Chaker to separately create duplicative sets of discovery to each of the Defendants is unnecessary here. Given their trustee-beneficiary relationship, defendants are of an aligned interest in this matter. Ms. Chaker seeks to assert her rights against both Ms. Lindstrom and Ms. Lindstrom-Blech under the same claims, and would provide identical discovery to each defendant even if they were served separately. Thus, even if Ms. Chaker separately served Defendants with discovery defining “you” and “your” for each individual, but otherwise identical, Defendants would provide the same responses as already furnished, and would most likely answer provide answers applicable to Defendants collectively.
11. Compute the total debt-to-equity ratio for 2012 using Nash-Finch's data as reported and your adjusted figures. Include the tax adjustment in your computations. Which ratio provides the best measure of solvency and why? (Formula: total current and long-term debt/total equity.)
Torres’ common-size financial statements also show the changing composition of Costco’s financing structure over time. The fact that interest expense consistently fell over the five year span from -0.35% of net sales in 1997 to -0.09% in 2001 demonstrates Costco’s ability to reduce its overall amount of debt during these years. Exhibit nine’s balance sheet portion supports this reduction, documenting an increase in total current liabilities from 35.86% of total assets in 1997 to 40.76% in 2001 and an increase in accounts payable from 25.46% of assets in 1997 to 27.03% in 2001. This signifies that the company’s debts or obligations due within one year increased, further corresponding with the fact that short-term borrowing increased from 0.46% of assets in 1997 to 1.93% in 2001. With an increase in short-term borrowing it is logical to expect to see a decrease in long-term borrowing. The income statement proves that this is indeed the case, documenting a decrease in long-term debt from 16.74% of sales in 1997 to 8.52% in 2001. This relates back to the decrease in Costco’s interest expense on the income statement, representing the company’s decision to switch to short-term and away from long-term methods. Furthermore, the decrease in long-term debt helped account for a decrease in total liabilities from
form 10-k 2017 debt to assets analysis is 0.65. Debt to assets “focuses on the company’s ability to survive over a long period and the ability to repay a debt at its maturity/prior to its due date” (Bethel, 2017). TJX Company Inc. total liabilities were $8,373,209 and their total assets were $12,883,808. According to the financial analysis TJX debts are stronger than their stockholder’s equity which could put the company at risk. “However, despite the risk related with their debt most companys attain huge amounts of resources from creditors because of the returns of financial pulls” (Bethel, 2017). The company total liabilities are very high which could put the company at
According to the Equilibrium Theory, at the optimal leverage point the PV of tax expense should be equal to the financial distress costs. Simpson and Williams’ simulation model helped us to find the point, at which point the EBIT/Interest was equal to 2.8. However, financial model does not stand for the real world. The interest coverage of 2.8 is not suitable for Diageo, because there are many defects in the simulation model.
Already in 1958, Modigliani and Miller have pointed the discussion of capital structure towards the cost of debt and equity. According to their first proposition, in a world of no corporate taxes and with perfect markets, financial leverage has no effect on a firm’s value. In their second proposition, they state that the cost of equity equals a linear function defined by the required return on assets and the cost of debt (Modigliani and Miller, 1958).