Finance Assignment
Assignment Instruction
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Assignment Title |
Individual Assignment Task |
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Course Name |
Managerial Finance |
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Assignment Task |
Assignment tasks as per attached sheet. |
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Course Learning Outcomes Assessed |
2. Investigate the role of cash flow, financial analysis and the time value of money in financial decisions. 3. Apply cost of capital to determine the worthiness of capital projects. |
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Word or Page Limit |
----------------- |
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Presentation Format (e.g. MS Word document) |
Handwritten/ MS Word Document |
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Resources and Support Available |
College library, internet newspapers, magazines, or other reference sources. |
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Evaluation Criteria |
The instructor evaluates assignments and awards marks based on the following criteria: (a) Use appropriate tools and formulae for the analyses. (b) Show complete steps in the work and organize well. (c) Interpretation and analysis of the work. (d) As per the marking rubric attached. |
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Peer or Self-Assessment Required |
N/A |
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Feedback Details |
After marking the assignment, the instructor reviews the work with each student and discusses overall performance based on the evaluation criteria. The instructor uses a standard assignment feedback form. |
ASSIGNMENT QUESTIONS
QUESTION 1: [CLO 2] (6 Marks)
Mr. Carlos recently inherited a stock portfolio from his uncle. Wishing to learn more about the companies in which he is now invested, Mr. Carlos performs a ratio analysis on each one and decides to compare them to each other. Some of his ratios are listed below :
|
Ratio |
Island Electric Utility |
Burger Heaven |
Fink Software |
Roland Motors |
|
Current ratio |
1.10 |
1.3 |
6.8 |
4.5 |
|
Quick ratio |
0.90 |
0.82 |
5.2 |
3.7 |
|
Debt ratio |
0.68 |
0.46 |
0.0 |
0.35 |
|
Net profit margin |
6.2% |
14.3% |
28.5% |
8.4% |
Assuming that his uncle was a wise investor who assembled the portfolio with care, Robert finds the wide differences in these ratios confusing. Help him out, answering the following:
(a) What problems might Robert encounter in comparing these companies to one another on the basis of their ratios? (1.5 marks)
(b) Why might the current and quick ratios for the electric utility and the fast food stock be so much lower than the same ratios for other companies? (1.5 marks)
(c) Why might it be all right for the electric utility to carry a large amount of debt, but not the software company? (1.5 marks)
(d) Why wouldn’t investors invest all of their money in software companies instead of in less profitable companies? (1.5 marks)
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