Principles of Corporate Finance Imperial Tobacco

Question: Discuss about the Principles of Corporate Finance for Imperial Tobacco . Answer: Introduction Imperial Tobacco is a UK based company with headquarters in Bristol and primary listing on LSX. It has global presence with manufacturing locations spread across 51 worldwide locations and customer base in excess of 160 countries. The key markets for the company are EU and other European countries along with US and Asia (Imperial Tobacco, 2015). The current report aims to highlight the myriad risks that are prevalent in the business and also financing of the same. The financial performance is analysed by deployed ratio analysis tool for the consolidated financial statements for FY2014 and FY2015. Besides, the current capital structure of the company is critical analysed and suitable recommendations have been extended for an optimal funding mix going forward. Business and Financial Risks Akin to other businesses, the company also has sizable exposure to a plethora of business and financial risks. These are highlighted as shown below. Reducing size of the legitimate tobacco market An overall reduction in the tobacco products market is happening primarily because of the below mentioned reasons (Imperial Tobacco, 2015). The demand of products containing tobacco and their availability in most geographies is regulated towards government intervention due to the negative impact that these products have on human health. This regulation if increased in the near future would adversely impact the consumer demand and also enhance the costs for compliance. The government typically increases the excise duty levied on tobacco products which serves twin objectives. It increases the price of these products and thus limit the underlying usage while also enhancing the funds available for generating public awareness against such products. The above two measures give rise to a flourishing illegal trade market where tobacco products are imported from regimes which attract less taxation. Further, the counterfeits for various brands are on the rise in order to satiate the demand for tobacco products through cheaper substitutes. Besides, any slowdown in the economy particularly in prominent markets would adversely impact the income levels and thus would reduce the size of the legal market as consumers would decrease smoking or shift to cheaper alternatives in the form of illicit market. Regulatory and Legal Compliance Costs Due to the underlying nature of the business, there are sizable costs related to legal suits and compliance cases that negatively impacts the profitability of the business primarily because of the below mentioned reasons (Imperial Tobacco, 2015). Considering the wide geography of customer market which spans almost the globe, there are instances where the domestic law or the international laws are violated and the company has to pay financial penalties along with reputation loss. The users of tobacco products along with the e-vapour segment tend to file litigations against the company on account of the harm caused and hence sizable legal costs need to be expensed by the company in managing these, thus diminishing overall prof Markets downside risk particularly in Europe The company is present in various European markets in a very big way and hence its fortunes are related to the market conditions in these geographies. Any significant disruption in the stability of these would have profound impact on the sales. In case of any civil unrest or sustained instability in the region such as issues within the EU or exit of any particular nation, the business operations of the company would be hampered (Imperial Tobacco, 2015). Financial Risk It is evident that there is sizable debt in the books of account and hence decrease in the credit rating can result in higher finance costs thus acting as a drag on profitability. Further, sustained financial downturn in key financial markets may limit the refinancing capacity of the company and thus may require higher costs to service debts which are about to mature in the near future. Also, there is default risk especially if the business diminishes particularly to government regulation and thus default risk may go up which would lead to higher interest costs (Imperial Tobacco, 2015). Recent Financial Performance The financial ratios have been computed using the consolidated financial statements for the two most recent years. This serves as the basis for the comparison of the financial performance of the company in the recent times. Profitability Ratios Analysis The requisite profitability ratios are summarised in the tabular format shown below (Imperial Tobacco, 2015). Ratio Formula FY2014 FY2015 Gross profit margin Gross Profit/ Revenue 19.58% 20.45% Net profit margin Net Profit/ Revenue 5.46% 6.81% Return on Assets Net Profit/ Total Assets 5.58% 5.72% Return on Equity Net Profit/ Total Equity 26.45% 30.25% It is evident that gross profit has improved from 19.58% to 20.45% primarily to improvement in operational efficiency driven by the various initiatives for cost management undertaken by company. The increase in net profit margins is primarily due to hike in income from investment coupled with decline in tax outflow besides margin gains at gross level (Imperial Tobacco, 2015). The improvement in ROA and ROE is being driven by the increase in net income in FY2015. The comparable profitability ratios for BAT (British American Tobacco) are given below. It is apparent that BAT has superior profitability margins as compared to Imperial Tobacco. However, in the recent year there has been a sharp decline in the gross profit margins for BAT. But the profit margins continue to rise on back of cutting down on operating expenses. Hence, Imperial Tobacco has improved its profitability but more needs to be done. Liquidity Ratios Analysis The requisite liquidity ratios are summarised in the tabular format shown below (Imperial Tobacco, 2015). Ratio Formula FY2014 FY2015 Current Ratio Current Assets/ Current Liabilities 3.35 3.30 Quick Ratio (Current Asset - Inventories)/ Current Liabilities 2.98 2.99 It is evident that at the end of FY2014, the current ratio was higher as compared to the corresponding value at FY2015 end. This is because the % increase in current liabilities was comparatively higher than % increase in current assets in FY2015. The current liabilities increase can be explained on account of the increase in short term loans from a mere 429 million at FY2014 end to 1,957 million at FY2015 end. Quick ratio underwent marginal improvement at FY2015 end as the inventory level decreased marginally (Imperial Tobacco, 2015). Turnover Ratio Analysis The requisite turnover ratios are summarised in the tabular format shown below (Imperial Tobacco, 2015). Ratio Formula FY2014 FY2015 Asset Turnover Sales/Total Assets 1.02 0.84 Inventory Turnover Cost of goods sold/Inventory 7.40 7.08 Receivables Turnover Sales/Accounts Receivables 9.58 10.31 Payables Turnover Cost of goods sold/Accounts Payable 3.06 2.96 It is evident that in FY2015, the asset turnover has declined because of the decrease in revenue caused due to lacklustre performance of some European markets (Imperial Tobacco, 2015). This drop in sales has resulted in the decrease inventory turnover for FY2015. However, the trend is opposite for receivables turnover ratio which has improved even though sales are lesser primarily because receivables days have become less which leads to drop in the cash cycle and hence diminishes working capital requirements. The cash cycle is further shortened since there has been a decrease in payables turnover in FY2015 which in turn provides a larger credit period for the company (Ross, Westerfield Jordan, 2013). Therefore, all turnover ratios besides the asset turnover and inventory turnover are favourable for the company since it amounts to better liquidity. The comparable ratios for BAT are given below. Even though BAT has seen a drop in asset turnover, but it continues to be superior than Imperial Tobacco indicating better usage of assets for BAT. The inventory turnover for BAT continues to be marginally higher than corresponding value for Imperial Tobacco. The receivables turnover for BAT is higher than Imperial Tobacco which indicates that BAT is able to recover money from its debtors in a shorter time. Gearing Ratios Analysis The requisite gearing ratios are summarised in the tabular format shown below (Imperial Tobacco, 2015). Ratio Formula FY2014 FY2015 Debt to equity ratio (Short term + long term debt)/ Total equity 1.81 2.49 Interest Coverage Ratio Operating Profit/ Interest Expense 1.91 1.64 Long term debt to equity ratio Long term debt/Total equity 1.73 2.15 It is clear from the above values that the contribution of debt has increased which is on account of increases in both term borrowings and current borrowings. The long term borrowings have undergone an increase from 9,462 million at FY2014 end to 12,250 million at FY2015 end. The short term or current borrowings have undergone an increase from 429 million at FY2014 end to 1,957 million at FY2015 end. It is apparent that a major proportion of the outstanding debt is long term in nature (Imperial Tobacco, 2015). Besides, due to an increase in the total amount of debt, the finance cost has also risen which is responsible for the declining interest coverage ratio for FY2015 (Brealey, Myers Allen, 2008). Debt capacity and financing options It is clear that the company has not generated additional funds through equity issue but has instead relied on debt for its funding requirements. The debt equity ratio in FY2015 had touched a crucial level and when seen in light of the declining interest coverage ratio, it poses pertinent questions on the ability of the company to raise more debt for its growth and business operations. Based on the existing capital structure, it is apparent that debt funds about 71% while the remaining is contributed by equity. However, this seems to be acceptable in the industry as BAT also boasts of debt funding of about 77% while the equity component being only 23%. However, the ability of the company to increase the debt levels further may not be wise since owing to greater risk the financing cost may increase thus eroding profitability of the business. It is advisable that the company raises more equity especially as the global markets are steadily improving and as a result, Imperial Tobacco can expect reasonable valuations in case it goes for dilution of holding for raising money. This move would enhance the balance sheet strength and would provide comfort to the lenders who are weary of increasing debt especially in a business where frequent government regulation and legal litigation are a big concern (Brigham Ehrhardt, 2013). Recommendation Any firms optimal capital mix is driven by a host of variable such as firms size and market share, composition of balance sheet, tax regulations, requirement of capital etc. In order to ascertain the capital requirement, the balance sheet and particularly the composition of assets is a critical factor. For imperial tobacco, about 60% of the total assets comprises of the intangible assets namely copyrights, brand name etc. The fixed assets contribute close to 10% to the overall company assets as per FY2015 balance sheet. As a result, any capital is requisite for acquisition purposes of either local player in growing markets along with other brands (Damodaran, 2008). Additionally, for BAT which is a peer group company, nearly 10% of the total assets is in the form of fixed asset and nearly 30% of the total assets is on account of intangible assets. It can be logically derived from the above that the outstanding debt should not be of grave concern keeping in mind that the company has limited requirements of capital for day to day business. Besides, considering the size, market share and global presence, the company can very well afford a balance sheet which is little stretched without causing any discomfort to lenders who would feel secured. But despite that, the company in the near future should aim for limiting the debt and may be bring it to a little lower level. A funding mix of 65 (debt):35(Equity) is advisable for the company going forward so as to ensure that balance sheet is not over leveraged. Conclusion It may be concluded that Imperial Tobacco has exposure to various business risks on account of government intervention in the form of duties and taxes besides battling legal issues and compliance with laws. Further, any disruption in select Europe markets may adversely impact the company. Also, on account of significant funding from debt, there is financing risk particularly if this trend goes on. The overall performance of the company has improved in FY2015 as compared to FY2014 as evident from ratio analysis. Currently, the balance sheet seems little stretched but considering the market reputation, global presence and nature of capital requirements, it is not worrisome. However, going forward a capital contribution of 65:35 is recommended so as to ensure business sustainability without too much dilution of equity. References Brealey, R, Myers, S Allen, F 2008, Principles of Corporate Finance, 9th edn, McGraw Hill Publications, LondonBrigham, EF Ehrhardt, MC 2013. Financial Management: Theory Practice, 14th edn., South-Western College Publications, New YorkDamodaran, A 2008, Corporate Finance, 4th edn, Wiley Publications Pvt. Ltd, London Imperial Tobacco 2015, Annual Report and Accounts 2015, Imperial Tobacco Group Plc, Available online from https://ar15.imperial-tobacco.com/pdfs/full-annual-report-2015.pdf (Accessed on March 23, 2016) Ross, S, Westerfield, R Jordan, B 2013. Essentials Corporate Finance, 8th edn., McGraw-Hill/Irwin Publications, New York

Of Mice And Men Dreams Essay Example For Students

Of Mice And Men Dreams Essay FOUND: An intelligent young woman on the verge of graduating seeks an opportunity to further her education. Coming from a small family, this extremely driven and focused woman needs your help in pursuing her dreams. She would like nothing more than to have a chance to better herself and her future. Going to the college of her choice poses a problem to her family however. The lofty expense of tuition may deter her aspirations of earning a degree and a potential career as a physical therapist. With the generous help your association presents as scholarship money, she will be able to reach and excel past her goals. Goals are not a foreign idea to this talented young leader. Since the age of four she has been actively participating in many recreational and competitive soccer clubs. Together with her teammates, scoring and working towards a common goal has been the main purpose throughout her years of play. This game of skill and physical force has taught the young woman about herself and has taught her lessons that can be learned through life. Once a shy timid girl, she has gained an assertive attitude along with the courage to conquer anything that stands in the way of her dreams because of her partaking in soccer. Ambition, respect, motivation, intuition, and the simple idea that hard work combined with cooperation can lead to big rewards has all been expressed to this young woman because of the game, and she takes this off the field into her everyday life.The definition of hard work can only be compared to the course load that she has decided to undertake her senior year. While many of her friends already have started slacking off by taking all art classes, she has not been influenced by their decisions. Enrolled in honors classes such as English IV and Pre Calculus, doubling up on her science classes; Physics and Chemistry, while also partaking in after school activities and honor societies, it has proven to extend this woman to the furthest point of her potent ial. Everyday she endures a new task and undertakes it with the utmost responsibility and precision. The effort which she puts into her everyday tasks reflects what she has learned in these past months from balancing a heavy school load and numerous extracurricular activities. This, I believe is what has progressed her maturation process and has made her a great attribute to the world and the society around her. I am this young dedicated woman who has been found. I know the course I would like my life to take, but I am in need of this scholarship in order for this to happen. Becoming a physical therapist has been my dream since I was injured and kept from playing soccer for an entire summer. The knowledge I already have of the subject has driven me to pursue this as a career. I have the ability to cope with irritated patients, because I once was one myself and have a better understanding of what they are going through. I know that I am an outstanding candidate for this scholarship a nd posses all the characteristics that an upstanding student should. My dream is to go to Northeastern University, better my life, interact in the school, and continue to mentally and emotionally grow.I hope that you would like to help and become a part of making this dream a reality. Bibliography:

Selena Lundy Essays - Linguistics, Modern English Personal Pronouns

Selena Lundy IDS 180 September 23 , 2015 Book Review Claudia Rankine : Citizen Book Review Using prose blocks intercepted with uncaptioned images from art and news media , Claudia Rankine's Citizen spotlights what it is like to be black in America. She listens over the shoulder of America and uncovers for the readers a racism that has really never gone away , but has merely been swept under the rug of our guilt and denial. Through condensed situations and problematic retellings of news and events , Rankine means to put one , as a reader, on alert to racism taking place in ones own daily lives . In the hopes of getting this past to the reader , Rankine uses the pronoun of "you " in second person to put the reader into the shoes of a black character who hits a social wall with that of the pronouns "he" or "she" who are to be presumed white. Changing the way that we as an average audience read a piece of literature by muddying the personas and pronouns , we are forced to work harder to better understand what it is like to face the faulty that is racism . Rankine 's use of second person makes us wonder how would we feel if we were treated the same way as those described in the book were . By not ending each section with a resolution , we are to think and wonder how we would resolve the situation if it were to really be happening to us . In order to answer these questions, we too must know how it feels to be alienated in the place that you live and call your home. Without that alienation , true answers cannot be given, and the matter cannot be improved. Along with this , Rankine uses situations, such as when the white woman states over lunch that affirmative action her son isn 't accepted to the same college that she, her father , "you", were accepted to, to erase "you" entirely. Page 142 says, "You nothing/ You nobody/ you ." Here it is plain and simple . "You" are a figure too worthless for even that of a pronoun . In concept with this book, being given a pronoun, a title, is the act of handing power over , which is something that the American society points out to the narrator isn't worth of , regardless of the fact that the narrator is a citizen the same as they are . Placed beside that of second person , Claudia Rankine is able to use powerful and unnerving imagines to penetrate the minds and bodies of her readers as they take in both the story's typed words on the page and the visuals that alone can have a story worth telling . Take the picture of the hood placed on the cover for example , black against the white background, painfully echoing Zora Neal Hurston's words, "I feel most colored when I am thrown against a sharp white background ." To have the black hoodie , separated from the rest of the clothing and empty, free from any who wear it , allows us to realize that we each have our own one single aspect of a person that takes place of their whole existence . Nearly 2000 years ago , religious fanatics in Northern Europe wore the hoodie as a cowl . Used in the 1979's motion picture Rocky, the hoodie was popularized around the time that hip-hop was born in The Bronx . 60 years before the image of the hoodie was made for Citizen , the hoodie had been in America for years, worn for warmth by blue-collar folks . The hoodie was once seen all around as full of rich history , but now it sends off a different message. The hoodie is no longer filled with history but with the iconic image of American fear, urban danger , and a 17-year-old boy without a gun. Made a couple years before , the imagine of this hoodie has again and again been said in sources to resonating the happenings of the Trayvon Martin case and how it has become normal

Tips to Help College Students Sleep

Tips to Help College Students Sleep College students and sleep dont often go together. In fact, when things get stressful, sleep is often the first thing to get trimmed from the to-do list of many college students. So when you finally do find the time to sleep, how can you make sure you can sleep well? Use Earplugs Theyre cheap, theyre easy to find at any drugstore (or even the campus bookstore), and they can block out the noise from your residence hall and your noisy, snoring roommate. Make Things Dark True, your roommate may need to be up all night writing the paper, but ask him or her to use a desk lamp instead of the main light for the room. Or, if youre crashing in the afternoon, close the blinds to help darken the room. Listen to Relaxing Music (Softly) Sometimes, turning out the outside world can be challenging. Try listening to some relaxing music to help you focus on calming down instead of everything going on around you. Appreciate the Sound of Silence While music can help, silence can sometimes be even better. Turn off your phone, turn off the music, turn off the DVD you wanted to watch as you fall asleep. Exercise Being physically healthy can help you sleep better, too. Try to get some exercise during the day not too close to when you want to sleep, of course, but even a brisk walk to your morning classes for 30 minutes in the morning will help you later that night. Avoid Caffeine in the Afternoon That cup of coffee you had at 4:00 p.m. could very well be keeping you up 8 hours later. Try water, juice, or any other caffeine-free option instead. Avoid Energy Drinks Sure, you needed that energy boost to make it through your evening class. But getting some exercise or eating a piece of fruit would have worked better than that energy drink and not kept you from sleeping later. Eat Healthy If your body is in a funk, it can be hard to sleep at night. Remember what your mama taught you and focus more on fruits, vegetables, water, and whole grains than coffee, energy drinks, fried food, and pizza. Lower Your Stress It may seem like Mission: Impossible, but reducing your stress can help you sleep. If you cant lower your overall stress level, try finishing a project or task no matter how small before you crawl into bed. You can feel accomplished instead of stressed about all you have to do. Relax for a Few Minutes Before Going to Bed Reading your cell phone, checking email, texting friends, and doing all kinds of brain-busy tasks can interfere with your ability to truly relax and rewind. Try reading a magazine for a few minutes, meditating, or just resting quietly with no electronics you might be surprised at how quickly you end up catching some zzzzzs.

Problems of Creation EU Essay Example | Topics and Well Written Essays - 500 words

Problems of Creation EU - Essay Example One can compare this problem with the case study of American. The USA is probably the country with highest levels of debts. However, it can never default on its sovereign debt obligations because it can print its own money to settle all the outstanding debts. However, Greece does not have this luxury. This has created a problem not just for Greece but also its creditors. Whenever there is a credit meltdown or a debtor defaults on his obligations, it starts a domino effect. It results in the collapse of the entire system or good part of it. This is what is happening to Euro. Since Greece has defaulted, there are chances that many other countries are going to collapse or fall down. Â  Many people say that Euro is built to the last. It can still exist despite the Greece example. This can be partly true. Although it looks difficult the probability of Euro recovering is not zero. Still, we can believe that the system might be able to sustain itself. The only way that Euro can sustain itself is that it starts focusing more on inter-lending and if it develops a system that focuses on a circular debt between the countries using the Euro. Since Euro is limited in supply, and no one country can print Euro, therefore in case credit event occurs in Euro-based lending, the ECB might be able to recover that or write off that loan in order to protect the system, or with the consensus of all EU countries, the amount of loan defaulted can be pumped into the country which has suffered a credit event. This would make sure that the EU crisis would not start a domino effect in the global financial markets and would not pose any global threat to the system. Â   Â  

Article and videos write ups for lessons 1 and 2 Assignment - 1

Article and videos write ups for lessons 1 and 2 - Assignment Example This article describes the humanoid evolutionary course in terms of awareness. The antiquity of the thinker is told â€Å"as if† it might be condensed to a four-act piece. If the symbol of a sequence of acts looks boring or that the advent to excellence of the human brain is too solid, then the production is an enjoyable surprise. Before Darwin, numerous scholars penned about the ancestries of man as well as the commencements of mental life. Such literatures, however, were forthrightly speculative since there were few concurred-upon evidences. There as no comprehensive hypothetical frame in which to place facts and beliefs. The article articulates that, in addition, he inspired scholars of biology and anthropological behaviour to and construe data applicable to the definite, as opposed to the fictional, "prehistory" of the human brain and man (Erickson and Liam 80). The word fieldwork is an interesting term to use to describe what an anthropologist needs to do since it embraces natural sciences and laboratory. Mostly it is about talking and observing conversations and talking to individuals as well as taking them what they think. It also encompasses doing things with other people. The video entails doing research work on three field sites, which include: The constant theme in the video resonates around the ideologies of Cultural Anthropology as a collective science that explores the way people comprehend as well as their worldly actions. The context of the short film features three associates of MITs Anthropology Division, Stefan, Erica, and Heather ho discuss their current effort and the procedure of doing fieldwork. This video involves Frans de Waal’s lecture on the moral behavior of animals. Empathy, collaboration, equality and reciprocity, which is caring about the happiness of others appears like a very human mannerism. However, Frans shares some astonishing videos of interactive tests on primates and other living things that display how several

History of Haute Couture Essay Example | Topics and Well Written Essays - 2000 words

History of Haute Couture - Essay Example Many scholars of the world have associated haute couture with the classy and luxurious lifestyles. Going way back to the 17th and 18th century when fashion is believed to have been invented, French fashion trends were simply the best in the entire of Europe and the rich, wealthy and the powerful individuals of the world travelled across the borders just to have a taste of the classic outfits in the French fashion market. These encounters laid the foundation of the Haute Couture a fashion that would later revolutionize the entire world’s fashion industry (Tortora & Keith, 2010, p. 19). The Haute Couture that is known today by many individuals of the world originated in the 19th century and was founded by Sir Charles Fredrick Worth (Ginsburg, 1989, p. 55). This is the person the scholars of the world credit with title ‘the modern Couture founding father’. Having founded his own couture house in the early 1858, Sir Charles Fredrick Worth introduced to the world very important innovations to the fashion industry through organized fashion shows. Following the elegance display of dresses on live models, his fame spread across the world like a bush fire and his work pleased very powerful and wealthy individuals of the time the likes of the famous Princess Metternich. Several years down the line, Charles Fredrick Worth together with his sons founded an association for the Haute Couture Houses. This was simply a criterion that the fashion designers of the time had to meet in order to be declared as ‘couturiers’. Ever since, the name has not only been regulated by the specific criteria but has as well been regulated by the government of France and reserved for only a number of persons. There is an exclusive class of designers who are only allowed to use the label in their designs. In the recent past, eligible haute couture houses are only determined by a commission