Using an Internet search tool, locate Procter & Gamble's investor relations web site. Under "Financial Reporting," you will find the company's 2009 annual report. In 2009, the company reported $8.6 billion in "accrued and other liabilities" and $79.0 billion in revenue, such that accrued and other liabilities equaled 10.9 percent of revenue. Using data provided in Note 3 of the annual report, discuss why a forecast ratio of 10.9 percent going forward would distort your forecast of free cash flow. How should the balance sheet be expanded to prevent this?
Answer to relevant QuestionsExhibit 9.14 presents the income statement and balance sheet for PartsCo, a $900 million supplier of machinery parts. Next year, the company is expected to grow revenues by 15 percent to $1,035 million. Using the methodology ...Exhibit 10.13 presents free cash flow and economic profit forecasts for ApparelCo, a $250 million company that produces men's clothing. ApparelCo is expected to grow revenues, operating profits, and free cash flow at 6 ...S˜ao Paolo Foods (introduced in Question 1) is considering a leveraged recapitalization of the company. Upon announcement, management expects the share price to rise by 10 percent. If the company raises R$200 million in new ...In Question 3, we computed ROE based on an equity calculation equal to the difference between finance receivables and debt related to those receivables. Why might this ROE measurement lead to a result that is too high? Exhibit 14.12 presents market and profit data for three companies. If Company 3 has nonoperating assets valued at $50 million, what are the company's appropriate enterprise-value-to-EBITDA and enterprise-valueto EBITA ...
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