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3 years ago

What are the effects of using leverage on cash flows?

1 answer:

3 0

The effects of leverage
Leverage, however, will increase the volatility of a company's earnings and cash flow. In finance, the term is used to describe the amount of cash (currency) that is generated or consumed in a given time period. There are many types of CF, as well as the risk of lending to or owning said company

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It is July 16. A company has a portfolio of stocks worth $100 million. The beta of the portfolio is 1.2. The company would like

Anuta_ua [19.1K]

Answer:

A. The company should take Short position and

140 contract

B. The company should take Long position and 60 contract

Explanation:

Calculation for what position that the company should take

Using this formula

Company position=(Beta of the portfolio*Change in beta of the portfolio) *Portfolio of stocks /Index futures price* Each Contract index times

Let plug in the formula

Company position =(1.2-0.5)*$100 million/2,000*250

Company position=0.7*$100 million/500,000

Company position=$70,000,000/500,000

Company position=140 contract

Therefore the position that the company should take will be SHORT position with 140 contract

B. Calculation for the increase in beta of the portfolio from 1.2 to 1.5 and what position tthr company should take in the futures contract and how many contracts

Using this formula

Company position=Increase in beta of the portfolio *Portfolio of stocks /Index futures price* Each Contract index times

Let plug in the formula

Company position =(1.5-1.2)*$100 million/2,000*250

Company position=0.3*$100 million/500,000

Company position=$30,000,000/500,000

Company position=60 contract

Therefore the company should take Long position and 60 contract

4 0

3 years ago

The logical sequence of the phases of a business cycle is: ____________

koban [17]

Answer:

phases in the sequence of Recession, trough, expansion and Peak

Explanation:

we know that 4 phases of a business cycle are

peak and downturn (recession) and trough and upturn (expansion)

top of cycle is called peak

and boom is a very high peak

recession where conomic activity is falling from the peak

and when decline persist for more than 2 consecutive quarters that is recession

and The bottom of the recession is trough

so we know business cycle is a economic model that describe fluctuation in economic activity

and that includes production of goods and service and business cycle go through its phases in the sequence of Recession, trough, expansion and Peak

7 0

3 years ago

Mountaintop golf course is planning for the coming season. Investors would like to earn a 12% return on the company's $45 mill

Nookie1986 [14]

Answer:

The correct option is B

Explanation:

The return on assets would be:

Return on assets (ROA)= Assets × Return

= $45,000,000 × 12%

= $5,400,000

Return per customer = ROA / Number of golfers

= $5,400,000 / 400,000

= $13.50

Fixed Cost per Customer = Fixed Cost / Number of golfers

= $20,000,000 / 400,000

= $50

Cost to be charged per customer = Profit + Fixed Cost + Variable Cost

= $13.50 + $50 + $15

= $78.50

8 0

3 years ago

Why did many Americans fear Vladimir I. Lenin and his followers, the Bolsheviks?

r-ruslan [8.4K]

The answer is A. Communism is an ideology where the state is the one who rules. It is a totalitarian form of government where individuals serve the Communist state and promote its ideology. It runs counter to American values because in a democratic society, people have the right to be what they want to be as well as express their opinions and ideas even if it means criticizing the government which cannot be done in Communism. Americans also value the right to accumulate wealth whereas Communism is against any form of capitalism. Everybody gets the same thing no more and no less. In a Democratic-capitalist society, you the right pursue your dreams as well as accumulate wealth so long as it is done with the laws.

3 0

3 years ago

Spartan systems reported total sales of $430,000, at a price of $25 and per unit variable expenses of $16, for the sales of thei

jek_recluse [69]

We are told the company had total sales of $430,000 and sold each product for $25. We can conclude that they sold 17,200 units of their product by dividing 430000 by 25.

As we are selling a single product in the problem's text, and because we told both per-unit contribution margin and net operating income, we have enough information to build a contribution based income statement. In a contribution based (or internal) statement, Revenue - Total Variable Expenses = Contribution Margin and Contribution Margin - Total Fixed Expenses = Operating Income.

$430,000 Total Sales Revenue

(275,200) Total Variable Expenses

$154,800 Total Contribution Margin

(113,000) Total Fixed Expenses

$41,800 Net Income

Think of our above statement as the BEFORE. Now we are going to make the AFTER and increase the volume. Since the selling price is $25 and we sold 17,200 units, we multiply 17,200 times 20% to find the new units sold. 17200 * 20% is 3440 units. We add that to the 17.200 units to find our new sales volume, which is 20,640 units. Since each product sells for $25 each, we can calculate our new contribution margin.

$516,000 Sales Revenue AFTER 20% increase

(330,240) Variable Expenses AFTER 20 % increase; 16 * 20640

$185,760 Contribution Margin AFTER 20% increase

Thus the new contribution margin is $185,760.

3 0

3 years ago