a) What is the level of earnings and the growth in the levels of earnings expected...
a) What is the level of earnings and the growth in the levels of earnings expected to persist in the future?
-minority interest in earnings
-retained earnings
-sustainable earnings
B) The operating cycle must not only generate cash to supply _____ (choose answer) working capitaloperating working capitalservice working capitalItem 1 needs, it must generate sufficient cash to service debt.
-operating working capital
-funding working capital
-service working capital
с) Return on assets can be a misleading ratio when analyzing technology firms because two important assets 1)_________ ? and 2)______? do not appear on their balance sheets
1) their cost structures/ their employees/their investors
2) their operations/ their technologies/their credit polocies
Homework Answers
a]
This is called sustainable earnings.
Minority interest is the portion allocated to non-controlling interest.
Retained earnings are that portion of earnings not paid out as dividends
b]
Operating working capital.
The operating cycle determines the working capital investment required - A shorter cycle will reduce the investment required and a longer cycle will increase the investment required in working capital.
c]
1] Their employees - Employee's skill and talent is not recorded in the balance sheet but it is a huge asset for technology companies
2] Their technologies - Their technologies are know-how and intellectual property which do not appear in the balance sheet at their fair values because estimating their values is extremely complex.
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