Overview- Assume you have just earned an MBA and taken a position as an analyst with an investment bank. You are assigned to a team of analysts responsible for monitoring pharmaceutical companies. Your report would be used in formulating buy/sell recommendations on these companies.

Assignment- Select Teva Pharmaceutical Industries, Ltd. and Merck & Co. for comparative purposes. Prepare a three‐year comparative report and financial analysis on the two companies using the most recent financial data from each company's annual financial statements.

Requirements The report must include:

1. Description and background of companies and product lines

2. How they compare:

a) Financially 1. Working capital 2. Current ratio 3. Liquidity 4. Financial leverage 5. R&D Expenditures 6. Profitability 7. Out‐of‐theordinaryevents/transactions 8. Cash flow analysis 9. Return on assets (ROA) 10. Return on equity (ROE)

b) Operationally 1. Number of days in accounts receivable and accounts receivable turnover 2. Number of daysin inventory and inventory turnover 3. R&D percentage ofrevenue 4. Organic growth vs. growth through mergers and acquisitions 5. Off‐balance sheetobligations

3. Recommendations on how the companies could improve ROE

4. Conclusion as to financial strengths and weaknesses of each company

Blossom Company has provided information on intangible assets as follows.

A patent was purchased from Ford Company for $2,300,000 on January 1, 2016. Blossom estimated the remaining useful life of the patent to be 10 years. The patent was carried in Ford’s accounting records at a net book value of $1,800,000 when Ford sold it to Blossom.

During 2017, a franchise was purchased from Polo Company for $500,000. In addition, 4% of revenue from the franchise must be paid to Polo. Revenue from the franchise for 2017 was $2,300,000. Blossom estimates the useful life of the franchise to be 10 years and takes a full year’s amortization in the year of purchase.

Blossom incurred research and development costs in 2017 as follows.

Blossom estimates that these costs will be recouped by December 31, 2020. The materials and equipment purchased have no alternative uses.

On January 1, 2017, because of recent events in the field, Blossom estimates that the remaining life of the patent purchased on January 1, 2016, is only 5 years from January 1, 2017.

1) Prepare the intangibles section of Blossom’s balance sheet at December 31, 2017.

2) Prepare the income statement effect (related to expenses) for the year ended December 31, 2017, as a result of the facts above.

Ram Corporation purchased a new truck on January 1, 2020 for $50,000.  The truck is expected to last five years with a residual value of $10,000.  Using straight-line depreciation, show the effect on the income statement and balance sheet of this transaction over the next five years.

Income statement

2020                 2021                 2022                 2023                 2024

Depreciation expense    $8000               $8000               $8000               $8000               $8000

Balance Sheet

2020                 2021                 2022                 2023                 2024

Equipment                    $                      $                      $                      $                      $

Less: accumulated

  Depreciation               (                   )       (                 )       (                 )        (                 )        (                  )

Book value                    $                      $                      $                      $                      $

Part II – Chapter 8

                                    Company A                   Company B                   Company C

Days sales in receivables            8.3 days                        39.9 days                      60.3 days

Days sales in inventory              2.3 days                        45.8 days                      95.8 days

Debt/equity ratio                      34.8%                           107.5%                         62.3%

Times interest earned               14.5 times                    7.8 times                      4.5 times

Gross profit margin                   37%                              70%                              20%

Price/earnings ratio                   15                                3                                  18

Bold the correct answer in each of the questions below.

1)  Refer to the days sales in inventory.  If one of the companies above is McDonald's, one is Apple, and one is BMW Auto Sales, which is likely BMW?                             

            A             B            C   

2)  Which company is best able to meet its interest obligations?             

            A             B            C   

3)  If one of the companies above sells primarily on net 45 day sales terms with no discount offered for early payment, which is it likely to be?

            A             B            C   

4)  Assume one company is McDonald's, one is Wal-Mart, and the other is a high end jeweler, which is likely the jeweler?

            A             B            C   

5)  Which company has the least percentage of assets financed by owners?

            A             B            C   

6)  Which company apparently has investors worried about its future?

            A             B            C   

You are the Chief Financial Officer of Incomprehensible Technologies Inc. (ITI). The CEO has asked you to calculate the firm’s overall WACC. Your team of analysts has presented you with the following data:

• Common Stock: The company has 50,000 shares of common stock outstanding that sells for $10 per share. The stock’s beta is 1.8, Treasury Bills are yielding 2%, and the expected return of the market is 7%.
• Bonds: The company also has 400 bonds outstanding with a par value of $1000 and make semi-annual coupon payments. The bonds have a coupon rate of 5%, there are 12.5 years to maturity, and they are currently selling on the market at $912.93.
• Preferred Stock: The company has 5,000 shares of preferred stock outstanding selling at $20 per share. The dividend on the Preferred Stock is $0.75 per quarter.
• Ignore the effect of taxes

Question 11: What is the company's cost of equity?

Multiple Choice

• 11.0%

• 14.6%

• 9.0%

• 12.6%

• 11.9%

  Question 12: What is the company's cost of debt?

  Multiple Choice

• 3.0%

• 5.0%

• 5.7%

• 6.0%

• 11.3%

  USE THE FOLLOWING DATA FOR QUESTIONS 11-14

  You are the Chief Financial Officer of Incomprehensible Technologies Inc. (ITI). The CEO has asked you to calculate the firm’s overall WACC. Your team of analysts has presented you with the following data:

• Common Stock: The company has 50,000 shares of common stock outstanding that sells for $10 per share. The stock’s beta is 1.8, Treasury Bills are yielding 2%, and the expected return of the market is 7%.
• Bonds: The company also has 400 bonds outstanding with a par value of $1000 and make semi-annual coupon payments. The bonds have a coupon rate of 5%, there are 12.5 years to maturity, and they are currently selling on the market at $912.93.
• Preferred Stock: The company has 5,000 shares of preferred stock outstanding selling at $20 per share. The dividend on the Preferred Stock is $0.75 per quarter.

• Question 13: What is the cost of the company's Preferred Stock?

  Multiple Choice

• 6.2%

• 3.8%

• 15.0%

• 4.4%

• 7.8%

  USE THE FOLLOWING DATA FOR QUESTIONS 11-14

  You are the Chief Financial Officer of Incomprehensible Technologies Inc. (ITI). The CEO has asked you to calculate the firm’s overall WACC. Your team of analysts has presented you with the following data:

• Common Stock: The company has 50,000 shares of common stock outstanding that sells for $10 per share. The stock’s beta is 1.8, Treasury Bills are yielding 2%, and the expected return of the market is 7%.
• Bonds: The company also has 400 bonds outstanding with a par value of $1000 and make semi-annual coupon payments. The bonds have a coupon rate of 5%, there are 12.5 years to maturity, and they are currently selling on the market at $912.93.
• Preferred Stock: The company has 5,000 shares of preferred stock outstanding selling at $20 per share. The dividend on the Preferred Stock is $0.75 per quarter.

• Question 14: What is the company's WACC?

  Multiple Choice

• 7.0%

• 8.2%

• 11.6%

• 8.9%

• 9.5%

• Ignore the effect of taxes
• Ignore the effect of taxes

1. Read carefully the below problem text and write the following proposal sections in paragraph format:

1. Analysis of the problem
2. The reasons
3. Proposed solutions
4. Risk to the organisation if the proposed changes are not made

Hunter Co.:

The Hunter Company is a chain of restaurants that are widely distributed across the Kingdom of Saudi Arabia. The business started in 1995 with one branch in Jeddah. It was very successful as it was always crowded and widely complimented by customers in terms of food quality, hygiene and service level. The company then created an expansion strategy to meet the increasing demand. Between 2000 and 2015, The Hunter Co. has opened 50 branches in 30 cities in Saudi Arabia. However, Hunter Co. reported 30% drop in earnings for the second quarter of 2015. In an attempt to understand the causes of such drop, The Hunter company has discovered that customer satisfaction level massively dropped! While gathering information related to the reasons behind the major drop in customer satisfaction, the following comments were given from customers. Many complaints about inappropriate staff behavior. Moreover, complaints about food quality. The service varies from time to time and from a branch to another. Long waiting time. Employees are not taking care of hygiene and cleanliness. In general, they confirm that the food and service quality are below the standards set by the company. The following comments were given by the restaurant staff: Salary is different for the same levels in different restaurants. Nobody cares about how we feel. The company`s CEO says that quality is a priority, but they have brought low quality raw materials to save money. High staff turnover pressure on existing serving staff and managers. The Hunter restaurant is under a real threat of going out of business. They need for transformation to re-gain customer trust.

Apple Computer CEO Steve Jobs announced he was taking a leave of absence for health reasons. Jobs has been fighting cancer and also recently underwent a liver transplant. Even though the computer giant is in good hands with Chief Operating Officer Tom Cook taking over the stock price fell by​ US$6.40, or nearly two​ percent, on the news.

Jobs is widely known as a visionary and a micromanager. Under his leadership Apple has transformed the computing industry. While​ Jobs' health outlook is unknown many investors are betting on his recovery and return. Those who bought Apple stock when Jobs stepped down in 2004 for health reasons made a nice profit when he returned to the helm.  

Question                                                                                                                               2 Marks

“When a financial manager makes good or bad financial decisions the impact of these decisions will be reflected in the​ company's Stock price”.

Do you agree with the decision taken in the above case? What decisions you will take to improve the stock price of Apple Computers in this situation?

Answer those questions.

Is Social Responsibility Too Much of a Burden for Corporations?

Globalization has had a positive effect on Corporate social responsibility

Globalization has had a negative effect on Corporate Social Responsibility

A Business Leader whose ethical Character virtues you Admire

Businesses’ Influence on Government and Public Policy will be beneficial to Society

Is Business Ethics an Indispensable Function of Corporations in the 21^st Century?

Do businesses have any Social Responsibility to the Communities in which they Operate?

The Social Responsibility of a Business in the 21^st Century Goes Beyond Just Making Profits

A Ethical Corporation you admire

Should a corporation be allowed to make unfettered profits regardless of its moral values?

A chief executive officer (CEO) you admire

The Stakeholder Approach is the perfect Framework in understanding the importance of Corporate Social Responsibility

Should Corporations or the Government Lead us towards a Sustainable Future?

The Ethical Challenges involving Technology

Diversity in any Corporation brings advantages

Affirmative action is not reverse discrimination.

Affirmative action is reverse discrimination

Whistle Blowing is an indispensable tool to keep Corporations Ethical

HI There, there is no solution for a problem that I am looking for. Advanced Accouting - Chapter 4, problem 30. Can you please assist? Thanks.