Why Conceptual Framework is Important for Companies?

The public confidence can be restored if all the companies in America start to follow conceptual framework. It is important as the main aim of financial report is to form a basis for the Conceptual Framework along with many other features of the Framework emerging from it and to give financial information related to the entities of reporting which are valuable to the current and potential lenders, investors and some other creditors which help them in making decision of supplying resources to the entity. Also, user are directed who supply resources to entity of reporting but they don’t have capability to force the entity for giving them information which they need to make decisions related to their investments. The conceptual framework designed by regulatory bodies play important role in transparency and accountability of this information.

I also agree with other student post that FASB and IASB concluded that it is important to guide and impart structure to financial reporting and accounting. Infact National standard setters used this result to prepare a model which can be used as manual or guidelines for preparing financial reports as per our financial management homework help experts. This conceptual framework has helped standard setters to decide best solution for preparing financial report and achieve their goal without any difficulty. When no hints are given then the standards are made by members of standard setting committee on the basis of conceptual framework.

When the standard setting committee creates standard according to their individual views then they are not applicable everywhere. And when the members change they put different views on different issues.so the same issues identified by different members and at different time may have different conclusions. So on being produced individual framework by each and every member it should be deeply rooted in fundamentals within, avoiding completely personal opinion which seems to be set of rules. Therefore FASB and IASB decided to create some concepts which would than become the standards. These concepts would not be just on the basis of some set of rules but must be on the basis of some principles which in turn help in restoring public confidence in corporate financial statements.

Walmart needs to get low-pay individuals by offering the job of checking financial accounts into its stores. It has made an adversary of banks, who are itching to get the retail titan off their turf. Americans don’t have faith on bankers; neither do the bankers have any trust on Walmart. America’s largest retailer has for a long itching to be something else: a giant of the financial business.

Investors, their antennae caution to rivalry, have steadily attempted to hinder the superstore from turning into federal bank sanction as far back as five years. Walmart has evaded its opponents by getting through backdoors: earlier this year, cash transfers and previously via pre-paid cards. Presently Walmart has an obsession of morphing into a bank, straight up with others trying to open its store in New York City as per online operations management essay writing help experts.  The hard-won advancement of Walmart has come with associations, for Blue Bird pre-paid cards with American Express as well as with Green Dot for the cash transfers and checking financial accounts.

These are additionally not clients that investors have demonstrated any ability to battle for, and which investors really need. Walmart has endured a cataclysmic departure of lower pay Americans since the time that cuts to food stamps occurred towards the end of 2013. By offering less-cost banking venture, the retailer would like to provide them a motivation to drop by the superstores.  A non-branch Bank of Walmart named the ‘digital only’ provides three functions. Primarily, it brings the unbanked, low-waged family into a Walmart store. At this time, that unbanked client is strolling or utilizing public means of transport to purchase basic needs and staples from Dollar Tree, Dollar General, and Family Dollar.

Secondly, it provides Walmart access to client information,” he continued. “Walmart blossoms on information. By getting a better insight into its customer’s financial base, and while they are purchasing, Walmart could make for more gainful usage of one of its biggest positive resource: its inventory“. And lastly, it provides the association a new stage to advertise across its social media, website and TV.  The only inquiry is whether the plan will work. Regardless of the fact that if bankers grouse, low-wage shoppers are liable to discover a Walmart record engaging.  Hence, Walmart is going to provide benefits to customers but at the costs of big banks businesses.

 

Advertisements

How to solve finance case study for Exam preparation?

This article is written to help student to understand how to write case study for finance to get online exam help in classes during evaluations.

Introduction

 

This report is written to do recapitalization analysis of Wrigley Jr. Company (WJC) using various financial tools so as to see its effect on EPS and share price and also value to existing shareholder to take final decision.

Key Issues

 

The major key issues mentioned in the case are as follows:-

  1. What is the firm value after issuance of Debt?
  2. Which is the most reasonable rate to value debt?
  3. Is the size of debt issue as given in the case is correct?
  4. Impacts of debt on EPS, WACC and share price
  5. How debt issues affect the Wrigley’s family?

Evaluation Technique

 

The analysis will be done by finding the return shareholder will gain from change in share price due to effect of leveraging using Adjusted Price value method. Besides these the effect of leverage will be evaluated on EPS using sensitivity analysis.

Discussion & Analysis

 

 Value of the Firm before Leverage

 

The value of the firm before leverage comes out as $56.37 per share as given below:-

Before
Recapitalization
Book Value Balance Sheets
1 Net working capital $581,609
2 Fixed assets, marketable securities, deferred tax assets $851,795
3 Total assets $1,433,404
4 Long-term debt $0
5 Deferred taxes, other noncurrent liabilities $157,127
6 Common equity $1,276,287
7 Total capital $1,433,414
8 Book value per share $5.49
9 Book value of equity divided by total capital 89%
Market Value Balance Sheets
10 Net working capital $581,609
11 Fixed assets $12,678,217
12 PV debt tax shield  (equals 0.40 times debt balance) $0
13 Total assets $13,259,826
14 Long-term debt $0
15 Deferred taxes, other noncurrent liabilities $157,127
16 Common equity $13,102,699
17 Total capital $13,259,826
18 Number of shares              232,441
19 Price per share $56.37
20 Market value of equity divided by total capital 99%
Value to Public Shareholders
21 Cash received $0
22 Value of shares $13,102,699
23 Total $13,102,699
24 Total per share $56.37

 

Value of Firm after Debt issuance

The value of firm after issuance of debt comes out as 57.66 and 57.69 in case of both dividends issuance and share repurchase respectively as given below:-

Wm. Wrigley Jr. Company, Inc.      
(values are in thousands)        
        Alternatives for Step Two:
        Dividend Share Repurchase
    Book Value Balance Sheets      
  1 Net working capital $581,609   $581,609
  2 Fixed assets, marketable securities, deferred tax assets $851,795   $851,795
  3 Total assets $1,433,404   $1,433,404
               
  4 Long-term debt $300,000   $300,000
  5 Deferred taxes, other noncurrent liabilities $157,127   $157,127
  6 Common equity $976,287   $976,287
  7 Total capital $1,133,414   $1,133,414
               
  8 Book value per share $4.20   $4.30
  9 Book value of equity divided by total capital 86%   86%
               
    Market Value Balance Sheets      
  10 Net working capital $581,609   $581,609
  11 Fixed assets $731,805   $731,805
  12 PV debt tax shield  (equals 0.40 times debt balance) $120,000   $120,000
  13 Total assets $1,433,414   $1,433,414
               
  14 Long-term debt $300,000   $300,000
  15 Deferred taxes, other noncurrent liabilities $157,127   $157,127
  16 Common equity $976,287   $976,287
  17 Total capital $1,433,414   $1,433,414
               
  18 Number of shares           232,441             227,119
  19 Price per share $56.37   $56.37
  20 Market value of equity divided by total capital 68%   68%
               
    Value to Public Shareholders      
  21 Cash received $300,000   $300,000
  22 Value of shares $13,102,699   $12,802,699
  23 Total $13,402,699   $13,102,699
  24 Total per share $57.66   $57.69
  25 Percentage change in value 2.3%   2.3%

 

Debt issuance Analysis

 

Cost of Debt

 

The cost of Debt taken to do analysis as per BBB-BB grade is not correct because as per ratio calculated and the range given in the exhibit 6. The correct grade will be for WJC will be AA-AAA grade and the corresponding debt rate will be 9.78% as given below and as per analysis done by our case study homework help expert:-

  Values Grade
EBIT interest coverage (x) NA AAA
Funds from operations/total debt (%) NA AAA
Free operating cash flow/total debt (%) NA AAA
Return on capital (%) 25.32% A-AA
Operating income/sales (%) 21.13% AA
Long-term debt/capital (%) NA AAA
Total debt/capital, incl. short-term debt (%) NA AAA

 

Size of Debt

The size of debt considering the amount of equity is reasonable as it reduces the book value of equity to total capital from 89% to 68%. The debt to equity ratio comes out as 30.72 percent which is similar to its trading peers. However company will have to consider its advantages as well as disadvantages before proceeding for final recapitalization. The various advantages and disadvantages are as follows.

Advantages

  1. It provides benefit in the form of Tax shield and increases the PV of the firm.
  2. It increases the return to the shareholders by providing more control over the company.
  3. It increases EPS by reducing WACC and thus increasing share price for the company.

Disadvantages

  1. The increase in debt increases the financial risks for the company
  2. It increases the costs in the form of distress and bankruptcy costs.

 

Effect of Debt Issuance

 

The debt issuance will affect the Wrigley family in the following ways:-

  1. It increases the current shareholding %ge of Wrigley family providing more control over the company.
  2. From the analysis in section 1, it clearly shows it increases the share price by 2.3% which means better market capitalization for the company as per our microeconomics assignment help tutors.
  3. The debt repurchase will be better for the Wrigley family as it increases their shareholding in the company.

Sensitivity Analysis

Without Debt

The EPS increases with increase in EBIT however increase as well as decrease is not much steep as shown below:-

EBIT  EPS
                                         527,366.00                 1.56
                                         100,000.00               (0.28)
                                         200,000.00                 0.15
                                         300,000.00                 0.58
                                         400,000.00                 1.01
                                         500,000.00                 1.44
                                         600,000.00                 1.87
                                         700,000.00                 2.30
                                         800,000.00                 2.73
                                         900,000.00                 3.16

 

With Debt

 

The EPS increases with increase in EBIT however increase as well as decrease is steeper compare to without debt case as shown below:-

EBIT  EPS
                                         527,366.00                 2.32
                                         100,000.00                 0.44
                                         200,000.00                 0.88
                                         300,000.00                 1.32
                                         400,000.00                 1.76
                                         500,000.00                 2.20
                                         600,000.00                 2.64
                                         700,000.00                 3.08
                                         800,000.00                 3.52
                                         900,000.00                 3.96

 

Conclusions & Recommendations

 

From the analysis we can conclude and recommend to WCH the following things:-

  1. The cost of debt should be as per AA ratings if they go for debt issuance
  2. 300,000 amount of debt issuance is reasonable looking after Peer Company’s debt.
  3. The company should go for Debt issuance as it increase the return to the shareholder and also EPS will increase further as per results from our macroeconomics assignment help experts.

 

 

 

Behavioural Theories and its Importance in Psychology

What are Behavioural Theories in Psychology?

Behavioural theories are the studies related to psychology branch and are also called as behaviourism. It is based upon the idea, that certain conditioning is always responsible for a certain behaviour in humans. The reason for the conditioning to occur inside the mind comes from distinct interactions in the surroundings. It helps to develop the course of certain actions in humans.

Regardless of the state a person mind has, behaviourism can steadily be studied in a systematic and observable manner. The study mostly focuses on the observable behaviours of a human action such as emotions, mood swings, cognitions etc. This topic has delivered many researches in psychology and such Psychology Essay writing help the researchers and budding learners in creating new experimental mindsets.

The father of behaviourism, Watson has once written in his classic paper that if a dozen healthy infants are provided to him with a surrounding based on his demands, he can raise them to be in different professions like lawyer, doctor engineers and even beggars and thieves regardless of their talents, genetic arrangement, abilities and tendencies.

Types of Conditioning

There are majorly two types of classified conditionings states.

  1. Classic conditioning: the attachment of the neutral stimulus with a naturally budding stimulus is done and observed in classic conditioning. The associated stimulus would be termed later as the conditioned stimulus. The behaviour that is rathe learned from it is called as conditioned response.
  2. Operant conditioning: It is also termed as instrumental conditioning and beholds the methods of learning that is induced by punishments and reinforcements. The case and effect or we can say, the behaviour and the consequences of it are associated through instrumental conditioning.

Importance of Behavioural Theories in Psychology

The major importance of behavioural theories in psychology gives an upper hand to the researchers. It helps them to conclude any behaviour and investigate it in a scientific manner. Although many philosophers like Freud, has established that including the subconscious mind is really important to account while studying behaviours.

It clearly measures the behaviour of a mind but it has severely failed many a times in addressing the biological as well as the cognitive processing to undertake human actions onto a new level as per study done by our psychology statistics case study assignment help expert team. Although the dominant force is diminishing but still it serves to be one of the most powerful tool to understand human psychology.

In many scenarios like how the learning buds inside the human minds and how they develop the languages they speak and write with fluency and efficiency; the conditioning studies have been actively utilized.

If we talk about the academic structure, the write ups and researches in the field of conditioning and behavioural psychology has produced many intellectual papers to study and develop theories. Students also take the help of cheap essay writing service online to know the deep understanding and expression of language in the terms of their write ups.

A human mind is built and made to establish standards and these standards are made to outbreak new ground-breaking assumptions and turning them to realities. A human mind is capable to doing and thinking unlimited possibilities to understand the existence.

 

 

Small Caselets Tax & Finance- Solutions Examples

Task 1

The analysis for Task 1 is given below:-

Bond Company Face Value (FV) Coupon Rate Annual Payment (PMT) Time-to Maturity (NPER) Yield-to-Maturity (RATE) Market Value (Quote) Discount, Premium, Par
‘A’-Rated 3M CO  $         1,000 3.875%  $      38.75                        20 3.421% $1,064.99 Premium
‘B’-Rated AAR CORP  $         1,000 7.250%  $      72.50                        10 4.592% $1,209.37 Premium
‘C’-Rated 99 CENTS ONLY STORES  $         1,000 11.000%  $    110.00                        10 6.700% 8.69% Premium

 

It shows that lower the rating greater will be the YTM due to increasing risks. The discount or premium is determined by YTM and coupon rate because if coupon rate is more than YTM then bond will be sold at premium or vice versa as per taxation homework help experts. As per my reading the YTM is going to increase with increase in maturity and vice versa which in turn decreases the bond market price.

Task 2

The return for three stocks on the basis of CAPM is given below:-

Company 5-year Risk-Free Rate of Return Beta (β) (Given) 5 Year Return on S&P 500 Required Return on Investment
Coca Cola 1.31%           0.73 15.9% 11.9%
Microsoft 1.31%           0.71 15.9% 11.6%
Exxon 1.31%           1.08 15.9% 17.0%

 

Now, the stock price on the basis of above calculation and current dividend is given below. It clearly determines whether the stock is currently traded at over or under price.

Company Current Dividend Projected Growth Rate (next year) Required Rate of Return (CAPM) Estimated Stock Price (Gordon Model) Current Stock Price Over/Under Priced
Coca Cola  $           1.22 9.00% 11.93%                   45.36                43.31 Under
Microsoft  $           1.24 9.00% 11.64%                   51.19                47.18 Under
Exxon  $           2.75 12.00% 17.02%                   61.31                90.89 Over

 

The third table calculates stock price one the basis of P/E ratio as given below:-

Company Estimated Earning (next year) P/E Ratio Estimated Stock Price (P/E) Current Stock Price Over/Under Priced
Coca Cola  $           1.96          24.80          48.61                   43.31 Under
Microsoft  $           1.75          24.80          43.40                   47.18 Over
Exxon  $           3.56          24.80          88.29                   90.89 Over

 

The entire analysis shows that the stock price is directly proportional to growth rate and dividend and inversely proportional to required rate of return as shown in the calculation from table 1 & table 2. The strength of Gordon model is that it calculates the stock price on the basis of net income but it misses the internal potential of the company.

On the other hand P/E ratio uses the earning potential with forward P/E to determine the stock price as calculated in third table as per analysis done by our case study homework help experts. The first model seems accurate as it is on the basis of current earning potential of the company and it also takes into account current risks through required rate of return of the company. The value of the stock will increase if growth rate, earning per share  and dividend increase whereas it will decrease with increase in required rate of return as per Gordon growth model since it depends directly on first three factors and inversely on the last factor.

Strategic Macro environment Analysis-Examples

Macro Economic Analysis

 

The Allphone management will have to think from different point of view as size of telecom business in Australia is huge with an estimated size of around 7.5 billion dollar and it is estimated that it will grow for next five years at rate more than 8-10% as per HSBC report. The Market is saturated with large no. of giant like Vodafone, Uninor etc. but still there is place for players who will serve great passion at economic rate.

The estimated industry revenue is $2 billion per year and it is also going to increase at same rate as mentioned above. Hence, the entire strategy of the Allphone should be made on the entire market prospect where forecasting of the sales will start from with new customers acquisitions as per findings by our statistics case study assignment help team. The whole business opportunity will be analyzed through macro analysis as given below:-

Technological Factors
Technology plays a very important role in developing many products in telecom industry. There are many advantages of the new technologies for both company and consumers and which are as follows:-

  • Now the costumers are more satisfied due to the instant and quick availability of the products.
  • With the help of these technologies, company can provide better and much personalized services.
  • And shopping is now more convenient for the costumers.

 

Legislative Factors

 

There are many legislations and policies of government by which the Company in this industry performance is directly affected. For example, an enforceable Code of Practice must be put up all the current practices must be banned such as asking for the payments from suppliers and the agreed prices are changed without any notice as per our legal case study homework help experts. A threat of severe wars in price of the products and strong necessities for the differentiation of products is created due to presence of many strong competitors with well-known brands. The policy of the government for monopoly can control and lessening the power of buyer can restrict this section’s entry through such controls like requirement of license and limitation or restriction is there to access the raw materials.

 

Economic Factors

Many economic factors affect demand, prices, supply and profits, so are of great importance. Highly unemployed population is one of them, which is not demanding for products, resulting in decreasing productivity. These factors depend largely on the factors exterior to the company; however they deviate the outcome and their performance.

 

Hence, the technological, legal and the economic factors will determine the future growth of the industry. As we already saw, the bad global economic conditions severely affected the international sales of the company.

Industry Analysis

The industry analysis presents the following facts for Walmart:-

  • This industry represents a significant portion of Australian GDP i.e. 7-8%
  • Cyclical stocks with great dividend opportunities
  • Highly leverd industry with greater opearting leverage

The huge capital, technical and leverage requirements make the industry Oligopolistic where few players are at Global and national level as per analysis and findings from business analytics assignment help experts. However, in local level one can find large no. of customized stores catering the needs of the customers.

3

Times Value of Money and How it affects investment in Superannuation Plan

In order to make the decision of the investment of the superannuation in a particular type of plan the time value of money plays a vital role in the decision making of such investment. The time value of money lays down the concept of the monetary growth of a particular sum of money invested for a certain period. The superannuation plans has certain factors that can decide the contributions. The contributions that are made in the regarding the superannuation has certain factors that determines in which plan the investment should be made. The portfolio of the investment determines the features of the investment and the plans and the policies of the particular type of the investments. As stated by Ramiah, Zhao and Moosa, (2014), the decisions taken by the manager in order to promote an investment may not be true in the real terms. It may be because of certain conditions

  • The market research conducted by our financial accounting homework help experts who manages the pension fund of the employee may not be linked with the actual situation of the economy. At times, there is instability in the economy, which makes this market research ineffective.
  •  At times there are certain government interventions regarding the operations of the economy. As stated by Shamsabadi et al.  (2017), the market research made by the pension manager of the company may suggest to adopt a particular scheme but the government may not encourage the people to adopt the schemes. In such cases, the government may suggest the policies of disinvestment in a particular scheme.
  • There may be at times when the government may adopt new schemes because the government has to make certain amount of expenditures on the population of the country, as it will have to incur a huge amount of expenses on the people affected by the natural calamities. As suggested by our exam help online team, in such a case the market research of the pension manager will be advantageous to the company and its employees but the government will have to increase the revenue. It makes the people invest in the schemes launched by the government. In such a case, the market research is not valid.

The tertiary sector employees need to adopt the policy to invest in a particular scheme. The scheme that is more advantageous needs to be adopted. There are different types of schemes that have been discussed. Besides, it can be concluded that the time value of money influences the decision-making in a particular type of scheme. In order t select a scheme a proper market research needs to be done by the manager but sometimes it may not be true.

Congruities in Strategic Management and Implementation Policies in Aviation

 

The pursuit of innovation.Drucker (2014) describes innovation as part of the strategic drivers of product enhancement. The practice of invention creates new and unique products that are customized to suit customer tastes and preferences. The arousal factor of new products triggers clients’ attempts to establish new experiences. Through innovative interventions, the Airbus and the Boeing Companies have been in a position to design products that attract the preference of both local and international markets. The technical departments in the firms endeavor to further their respective production lines with world-class brands. For instance, in 1937, the Boeing Company introduced the first ever commercial airliner with a pressurized cabin. The Model 307 Stratolinercould give the customers a new flying experience through improved pressure balance for comfort and unique ability to cruise at 20,000 feet as per our strategic management assignment help experts. According to Russo (2016), the height was far much above the zone of turbulent weather. In the 1960s, the company advanced into the manufacture of the hydrofoils that led to the assembly of the globally admired USS Tucumcari (PGH-2). Thirty-four years later, the Boeing 777 hit the market with a carrying capacity of 370 passengers. On the other extreme, Airbus designed the A300b carrier that was smaller in size and economical than the US models. This was succeeded by the A380 that had an ultra-high carrying capacity(Avdzhieva, Manhart, Krupp, Brackmann, Mathews, Kamperis, & Nigam, 2014). The firms maintain the modern technological applications to manufacturer sophisticated commercial airlines and private jets that in customer loyalty.

Compliance with political and legal requirements. The volatile nature of the aviation industry justifies the presence of administrative and legal regulations. Boeing and Airbus firms are multinational and hence are subjected to both local and foreign political and legal regulations. Boeing has historically been compliant to regulations. For instance, in 1934, the US federal government responded to the unhealthy competition in the aviation industry. The administration sought to discourage the situation by demanding companies to break monopoly (Simons, 2014). Boeing responded to the regulations by segmenting its structural constitution into subsidiaries. The compliance expanded the operability of the Boeing that facilitated the design and assembly of the Boeing 314 Clipper and Model 307 Stratoliner. Similarly, the Airbus responded to the French government’s call for cross-border integration by partnering with Germany and the United Kingdom. The heed to the political intervention led to the capture of a significant share of the European market (Mayer, 2013).

Calculated risk taking. Investment and risk-takingare part of the wide array of managerial roles that lie within the jurisdiction of the management.It is a success factor that allows companies to invest in highly risky ventures that promise good returns. In an endeavor to curb the risk, companies venture in uncertain practices in order to create competitive products. The Boeing and Airbus aerospace manufacturers have been engaging in mergers and collaborations with other air travel services with the aim of gaining international recognition as per our marketing assignment help experts. For example, the Boeing has engaged in several partners while Airbus’ most recognizable collaboration was between the company and Germany and the United Kingdom (Simons, 2014).Moreover, the company has engaged in trade deals with foreign governments in order to penetrate their local markets.However risky the plans have been, the firms have gained economically from the ventures.