Financial Statements Evaluation Lightweight Metals Technology

Question: Discuss about the Financial Statements Evaluation for Lightweight Metals Technology. Answer: Financial Statements Analysis of Cadence Company Three Years Information on Financial Statements of Cadence Financial Statements 2016 2015 2014 Total Equity $1075 $1376 $1334 Current Assets $5,380,636 $5,279,525 $18,891,137 Fixed Assets $320,750,485 $315,829,479 $245,691,848 Total Assets $342,212,110 $336,312,044 $264,657,154 Net Income $76,513 $85,375 $30,190,056 Amount Paid to Shareholders in Cash $12,341,213 $11,111,185 $9,898,166 Amount Paid to Shareholders in Stock Buybacks $421,915 $421,915 $421,915 Total Amount Distributed with Shareholders $123,834,128 $11,533,100 $10,320,081 Short Term Debt 50 0 342 Long Term Debt 643 349 349 Cash Flow Analysis of Cadence Cash Flow Statement 2015 ($) CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from the sale of investments 540,473,533 Payments for the purchase of investments (653,026,793) Capital return on investments Dividends received 8,761,126 Interest received 2,035,499 Other income received 13,950 Management fees paid (2,784,335) Performance fees paid (12,800) Brokerage expenses on share purchases (575,514) Interest paid (683,116) Dividends paid on shorts (242,449) Payments for administration expenses (707,717) Income tax paid (5,196,425) NET CASH USED IN OPERATING ACTIVITIES (111,945,041) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (15,650,799) Proceeds from shares issued 66,440,227 NET CASH PROVIDED BY FINANCING ACTIVITIES 50,789,428 NET (DECREASE)/ INCREASE IN CASH HELD (61,155,613) CASH AND CASH EQUIVALENTS AS AT BEGINNING OF THE FINANCIAL YEAR 93,826,031 CASH AND CASH EQUIVALENTS AS AT END OF THE FINANCIAL YEAR 32,670,418 Positive cash flow of Cadence that the company is increasing its liquid assets and using its increased cash flow in reinvesting in its business operations, providing a huge return to its shareholders, paying expenses and generate a safeguard against upcoming financial challenges (Cadence.com. 2016). MVA Calculation of Cadence Market Value Added (MVA) of Cadence in the year 2014: MVA+ Capital Invested = Market Value MVA= $231,197,359- $137,735,570 = $93,461,789 Market Value Added (MVA) of Cadence in the year 2015: MVA+ Capital Invested = Market Value MVA= $302,996,147- $280,018,162 = $22,977,985 Market Value Added (MVA) of Cadence in the year 2016: MVA+ Capital Invested = Market Value MVA= $330,896,158- $290,210,184 = $40,685,974 From the MVA analysis, it was gathered that the MVA of Cadence has decreased in the year 2015 and then increased in the year 2016. Such increase is because of the reason that it is generating positive returns and having strong leadership along with sound governance (Frattini et al. 2013). Analysis and Conclusions From the financial statement analysis, it was gathered that the company experiences positive ash flow in the year 2015. This is because of the reason that the company is increasing its liquid assets and using its increased cash flow in reinvesting in its business operations, providing a huge return to its shareholders, paying expenses and generates a safeguard against upcoming financial challenges (Golez 2014). Moreover, MVA analysis it was gathered that an increase in MVA of Cadence is for the reason that it is producing positive returns and maintaining strong corporate governance. Financial analysis over three years of the company revealed that the net income of the company has decreased over the past three years. Such decrease is because of the reason that its expenses have increased over the past three years. The company is dealing with increasing overhead costs, specially as the company increased the payment of long term employees ever year (Healy and Palepu 2012). Total assets of Cadence is observed to increase over the years from 2014 to 2016 because of the reason that it is not utilizing its assets efficiently in gaining maximum profits or has made increased investments in its assets hose are not contributing effectively to the bottom line. Financial Management 1. Date Price Return Dividend Return of dividend 7/1/2016 9.522239 3.02% 6/1/2016 9.243052 0.00% 5/4/2016 0.03 -3% 5/2/2016 9.243052 -16.77% 4/1/2016 11.105247 16.60% 3/1/2016 9.524464 7.28% 2/3/2016 0.03 -14% 2/1/2016 8.878232 23.03% 1/4/2016 7.216544 -26.14% 12/1/2015 9.770547 5.45% 11/4/2015 0.03 36% 11/2/2015 9.265686 5.15% 10/1/2015 8.811746 -7.56% 9/1/2015 9.532079 2.22% 8/5/2015 0.03 9% 8/3/2015 9.32486 -3.96% 7/1/2015 9.709269 -11.48% 6/1/2015 10.968424 -10.80% 5/7/2015 0.03 13% 5/1/2015 12.29644 -6.65% 4/1/2015 13.172549 3.87% 3/2/2015 12.681769 -12.64% 2/4/2015 0.03 -3% 2/2/2015 14.517288 -5.32% 1/2/2015 15.333686 -0.89% 12/1/2014 15.470857 -8.68% 11/5/2014 0.03 1% 11/3/2014 16.94054 3.35% 10/1/2014 16.391502 4.16% 9/2/2014 15.736234 -3.13% 8/6/2014 0.03 -4% 8/1/2014 16.244801 1.53% 7/1/2014 16.000385 10.07% 6/2/2014 14.536044 9.40% 5/8/2014 0.03 -9% 5/1/2014 13.28647 1.27% 4/1/2014 13.120182 4.66% 3/3/2014 12.535764 9.63% 2/5/2014 0.03 -4% 2/3/2014 11.43511 2.27% 1/2/2014 11.18171 8.28% 12/2/2013 10.326809 10.61% 11/6/2013 0.03 -7% 11/1/2013 9.335901 3.99% 10/1/2013 8.977975 14.16% 9/3/2013 7.864202 5.45% 8/7/2013 0.03 -12% 8/1/2013 7.457433 -2.78% 7/1/2013 7.670355 1.66% 6/3/2013 7.544929 -8.00% 5/9/2013 0.03 -1% 5/1/2013 8.201009 0.34% 4/1/2013 8.173272 -0.23% 3/1/2013 8.192504 0.00% 2/6/2013 0.03 1% 2/1/2013 8.192504 -3.30% 1/2/2013 8.471679 1.84% 12/3/2012 8.318345 3.21% 11/1/2012 8.059594 -1.87% 10/31/2012 0.03 -3% 10/1/2012 8.212928 -2.94% 9/4/2012 8.461397 3.50% 8/1/2012 0.03 3% 8/1/2012 8.174894 1.42% 7/2/2012 8.060293 -3.20% 6/1/2012 8.326749 2.34% 5/10/2012 0.03 4% 5/1/2012 8.136423 -11.84% 4/2/2012 9.228986 -2.89% 3/1/2012 9.504054 -1.47% 2/1/2012 0.03 3% 2/1/2012 9.64633 0.39% 1/3/2012 9.608389 17.46% 12/1/2011 8.18037 -13.67% 11/2/2011 0.03 -15% 11/1/2011 9.475991 -6.61% 10/3/2011 10.146461 12.43% 9/1/2011 9.024315 -25.23% 8/3/2011 0.03 -11% 8/1/2011 12.07014 -12.92% 7/1/2011 13.860662 -7.12% 6/1/2011 14.923971 -5.65% 5/12/2011 0.03 8% 5/2/2011 15.817904 -0.94% 4/1/2011 15.968544 -3.74% 3/1/2011 16.588499 4.81% 2/2/2011 0.03 4% 2/1/2011 15.827645 1.87% 1/3/2011 15.537673 7.67% 12/1/2010 14.43119 17.21% 11/3/2010 0.03 -7% 11/1/2010 12.311989 0.15% 10/1/2010 12.293448 8.51% 9/1/2010 11.329805 18.49% 8/4/2010 0.03 -8% 8/2/2010 9.561571 -8.27% 7/1/2010 10.423245 11.03% 6/1/2010 9.387453 -13.57% 5/5/2010 0.03 -10% 5/3/2010 10.861825 -13.12% 4/1/2010 12.502271 -5.69% 3/1/2010 13.256317 7.07% 2/3/2010 0.03 6% 2/1/2010 12.381251 4.71% 1/4/2010 11.824618 -21.03% 12/1/2009 14.973516 28.75% 11/4/2009 0.03 27% 11/2/2009 11.629555 1.04% 10/1/2009 11.509328 -5.34% 9/1/2009 12.158002 8.88% 8/5/2009 0.03 6% 8/3/2009 11.166458 2.71% 7/1/2009 10.872259 13.84% 6/1/2009 9.550207 12.04% 5/6/2009 0.03 -12% 5/1/2009 8.523999 1.96% 4/1/2009 8.360489 23.57% 3/2/2009 6.765821 17.82% 2/4/2009 0.17 -17% 2/2/2009 5.742651 -18.30% 1/2/2009 7.02879 -30.82% 12/1/2008 10.159715 4.65% 11/5/2008 0.17 47% 11/3/2008 9.708572 -5.14% 10/1/2008 10.234806 -49.07% 9/2/2008 20.095819 -29.72% 8/6/2008 0.17 98% 8/1/2008 28.595158 -4.29% 7/1/2008 29.876507 -5.25% 6/2/2008 31.531885 -12.24% 5/1/2008 35.93148 16.71% 4/30/2008 0.17 14% 4/1/2008 30.788292 -3.07% 3/3/2008 31.764774 -2.91% 2/6/2008 0.17 4% 2/1/2008 32.716129 12.83% 1/2/2008 28.996864 -9.47% 12/3/2007 32.028873 0.49% 11/1/2007 31.871138 -8.13% 10/31/2007 0.17 0% 10/1/2007 34.692833 1.64% 9/4/2007 34.132946 7.09% 8/1/2007 0.17 -1% 8/1/2007 31.873121 -3.94% 7/2/2007 33.1819 -5.75% 6/1/2007 35.205822 -1.82% 5/2/2007 0.17 7% 5/1/2007 35.8573 16.89% 4/2/2007 30.67713 4.69% 3/1/2007 29.302752 1.47% 2/1/2007 28.8792 3.44% 1/31/2007 0.17 -1% 1/3/2007 27.919729 8.20% 12/21/2006 0.15 -3% 12/1/2006 25.803797 -3.24% 11/1/2016 0.15 -7% 11/1/2006 26.667381 8.38% 10/2/2006 24.605515 3.10% 9/1/2006 23.865053 -1.92% 8/2/2006 0.15 -2% 8/1/2006 24.33316 -4.05% 7/3/2006 25.360125 Rate of return -0.11% 3% 2. Type of Debts Cost of Debts Amount Weight Tax Rate E/V D/V Common Stock 0.00% 1391 12.99% 35.00% 15% 85% preferred stock 3.75% 58 0.54% Commercial Paper 0.60% 198 1.85% Debt Capital 1.61% 9065 84.62% Total 10712 100% WACC 2% 3. The essay is indented to conduct an evaluation on Alcoa stock and computation regarding return rate of the companys stock is done from July 1, 2006, to July 1, 2016. By taking into account the gathered information from Yahoo Finance, calculation for return rate has been conducted and a negative figure is found with 0.11% (Dumont and Schmit 2013). On the other hand, after consideration of the holding period return initiative that encompasses dividend in computation and the figure is found to be 3% that is positive. Regarding computation, it can be stated that technique of holding period return is an advantageous strategy for obtaining increased return. After computation of weighted average cost of capital that is computed through extracting current information of the company and corporate tax rate taken into regard is 35% as per the US Federal rate. WACC is deemed 2% that is reasonable (Alcoa.com. 2016). Based on public source, the Acola split news has been famous and it is also deemed that it might further split within publically trading organization. This was acknowledged to be a legacy in aluminum operation and diversification within automotive industry. The organization has attained increased growth through its titanium and aluminum manufacture and from aerospace industry. As mentioned by Alocas CEO, it was the appropriate time for attaining split. The companys business division has attained a superior position and strategy for an organization attaining increased profit and revenue. After the split up of the company, it might add 40% of its profits within the sectors of Alcoa's Aerospace, automotive and transportation and in building construction. After the organizations decision of splitting Alocas shareholders might attain 80.1% shares in fresh shares (Chauhan and Singh 2014). Aloca might acquire 85% of the organizations shareholding worth $9 billion in the debt form by offerin g support to Alcoas existence within aluminum sector. Such split might facilitate the company in boosting anticipated trading price of a common stock, which further can support in enhancing the companys liquidity position. After evaluating the financial situation of Alcoas stock, it is gathered that the organization might earn increased profit after the split in two different organizations. Moreover, it was also gathered that recently the organization has authorized shares worth 1.8 billion (Davis and Haegler 2016). Within this division, Aloca will consider the specialty of value added offerings made of aluminum. Conversely, the companys another division is focused on automotive and aerospace and the transportation industry in attempt to attain increased return and revenue. Reference List Alcoa.com., 2016.Alcoa | Global Leader in Lightweight Metals Technology, Engineering Manufacturing. [online] Available at: https://www.alcoa.com [Accessed 29 Sep. 2016]. Cadence.com., 2016.EDA Tools and IP for System Design Enablement | Cadence. [online] Available at: https://www.cadence.com [Accessed 29 Sep. 2016]. Chauhan, A. and Singh, A.P., 2014. Optimal replenishment and ordering policy for time dependent demand and deterioration with discounted cash flow analysis.International Journal of Mathematics in Operational Research,6(4), pp.407-436. Davis, P.J. and Haegler, U., 2016. Mergers and Market Definition: Does a Focus on Value AddedAdd Value?.Journal of European Competition Law Practice, p.lpw015. 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