Business Valuation

Chapter 3

Ans 1

a) The assets like market securities, cash and near cash will be closer to the market value. The fixed assets will not be closer to the market value since they are entered at their book value.

b) Total fixed assets = 5486+199+2016 = $5685

Therefore Coco Cola might have paid $5685 for these assets.

Given that accumulated depreciation is 2016, and assuming straight line depreciation, asset is 36.75% depreciated.

c) The current assets to fixed assets is more due to the cash and near cash and other current assets value. The ratio currently is 6380/3669 = 1.73 , therefore current assets are 1.73 times the fixed assets taking in to account the other current assets and cash

d) This action would have lead to decrease in fixed assets and increase in current assets, since it would have received cash for the manufacturing facility (fixed asset) it sold

Ans 2

a) The interest bearing debt is $687+$4462 = $5149

b) $3060mn

c) The shareholders share in the company would have grown over time since the dividends that were supposed to be paid would have been invested in operating the company

d) The book value of equity is $8403 mn. It is less than the market value because market value also taken into account the market sentiments and company brand value.

Ans 3 Brand name of Coca Cola is an intangible asset and does not appear in balance sheet. However if the business is sold the brand name can be accounted as goodwill of the company.

Ans 4

a) Net Working Capital = $6380-$8640 = -2260

Non-Cash Working Capital = 1666+1049+2017-3141-1037 = 554$

b) Current Ratio = Current Assets / Current Liabilities

= 6380/8640

= 73.84%

c) Quick Ratio = 1648/8640 = 19.07%

d) The firm is not so much riskier since the difference between its current assets and current liability is not so much and also the long term liabilities are not so much

Ans 5

The operating income is 5001 and 4967. The difference is due...