KISMET Inc.

KISMET Inc. Executive summary Financial analysis of Kismet indicates that it was highly profitable during the first and second quarters. The profitability improved in the second quarter. Besides, the company had a strong liquidity and solvency indicating that it had sufficient assets to repay its debt. It has the character, capacity and condition for paying a loan from the people. Analysis of the cash flow statement also showed that it generated more cash than it used in the second quarter of the year. However, the company does not have adequate collateral to cover the entire $43,000 loan. The bank will incur a high risk if it advances the entire amount to the company. Alternatively, it can lend the company less than the amount requested or lend the same amount but on condition that the company guarantees that it will make adequate sales after the expansion. This may include signing pre-contract documents with customers. Problem statement Kismet wants to expand its operations and requires a loan of $43,000 as well as expanding its credit line from $5,000 to $10,000. The company has applied for the loan with its bank. The problem, in this case, is to analyze the financial performance and stability of the company, assessing its creditworthiness and evaluating options the bank has and recommending whether the bank should advance the loan or not. Ratio analyses and implications This analysis helps in determining the financial strength and performance of the business. It is important in determining the ability of the business to pay his debts. Relevant analyses include profitability, liquidity and solvency analysis. Analysis of liquidity Kismet’s current ratio for the three months ended July was 3.00 implying that its current assets were more than thrice the value of its current liabilities. This shows that it has adequate current assets to pay its current obligations. At the end of April, Kismet’s current ratio was 1.56. The increase in the current ratio in the second quarter shows that the liquidity of Kismet improved. Its cash ratio was 0.215 at the end of the second quarter and 0.152 at the end of eth first quarter. This suggests that its cash balance as at that date could pay 21.5% of the total short-term liabilities. The increase in the cash ratio indicates that the liquidity of Kismet improved in the second quarter. Kismet’s quick ratio was 0.244 and 0.176 in the second and first quarters respectively. It implies the Kismet’s quick assets (current assets excluding inventory) could repay only 24.4% of the total current liabilities. The increase indicates an increase in liquidity. The above liquidity analysis indicates that Kismet has a strong liquidity since its current assets are sufficient to clear up its current liabilities. This further implies that Kismet can pay its short-term obligations hence the bank should be worried about short-term lending funds to Kismet. The concern, however, is a significant amount of inventory which leads to a lower quick ratio. Profitability analysis Profitability analysis is important is it determines whether the firm’s operations are cost-effective. Profitable businesses generate adequate revenues thus enhancing their ability to repay debt. Kismet’s gross profit margin was 32.82% in the second quarter, up from 30.21% in the first quarter. This shows that it earned a gross profit of $0.3282 for every dollar of total revenue. The increase in gross margin suggests an improvement in Kismet’s profitability in the second quarter. Its operating profit margin increased from 8.61% in the first quarter to 15.67% in the second quarter. The net profit margin was 11.74% in the second quarter up from 6.45%. It suggests that it earned a net profit of $0.1174 per dollar of total revenue. The return on assets for Kismet was 52.12% in the second quarter and 15.99% in the first quarter. It shows that Kismet erased a net income of $0.5212 per dollar of total assets used during the second quarter. The increase in ROA shows that the profitability of Kismet improved in the second quarter. Kismet’s return on equity was 83.52% in the second quarter indicating that it earned a net profit after tax of $0.8352 per dollar of shareholders’ equity. The ratio increased from 52.99% in the first quarter to 83.52% in the second quarter. This suggests that the profitability of Kismet improved in the second quarter. Profitability ratios indicate that Kismet was profitable in both the first and second quarters. The high profitability is a positive contribution to its ability to honor its debt obligations. Besides, its profitability improved in the second quarter. Solvency/Leverage analysis This analysis helps in determining the financial stability of Kismet, including its ability to settle the long-term debt. The debt ratio for Kismet at the end of the second quarter was 0.314 indicating that Kismet financed the acquisition of 31.4% of its total assets through borrowing. This implies that it has a low leverage since the debt ratio is less than 50%. The debt ratio for the first quarter was 0.698. The decline in the debt ratio shows that the solvency of the company improved in the second quarter. The debt-equity ratio at the end of the second quarter was 0.458 indicating that Kismet had more equity than debt in its capital structure. The ratio shows that Kismet had a low leverage and strong solvency. In the first quarter, the debt-equity ratio was 2.313. The decline in the debt-equity ratio shows that the solvency of Kismet improved in the second quarter of the year. Kismet had an interest cover (times interest earned ratio) of 898 times. This shows that Kismet operating income (before interest and taxes) was 898 times the interest expense for the quarter. This shows that Kismet generated more than sufficient earnings to cover its interest expense. This indicates that the probability that Kismet will be unable to pay interest on its debt is very low. The interest cover increased from 602.28 times in the first quarter to 898.23 times in the second quarter indicating an improvement in the solvency of the company. The above analysis indicates that Kismet had a strong solvency. Its total debt is only 315 of the total assets. Besides, the balance sheet indicates that it does not have any long-term debt. It generates sufficient earnings to meet its interest expense. The string solvency implies that the financial risk involved in Kismet is low since the possibility of failing to honor its obligations is low. Thus, the bank should advance the required amount of debt to the company since it can pay interest on the debt as well as the principal. Statement of change and implication (sources and uses of cash) Analysis of the cash flow statement indicates that Kismet had a positive net change in cash at eth end of the second quarter. Its short-term financing sources included taxes payable and working capital loan. The total short-term sources of finance were $6,812. It also obtained cash from long-term sources such as retained earnings (sales- operating activities) and the sale of fixed assets. It sold a fixed asset $1,000 while its retained earnings were $67,293. The total cash inflows (sources of cash) were $75,105. Its uses of cash included the purchase of inventory worth $58,389 and payment of accounts payable of $15,479. During the second quarter, the company’s cash inflows (sources) were more than its cash outflows (uses). The analysis indicates that the company does not face any cash flow problems. It has adequate cash to finance its daily operations. Cash flow stability is important in the evaluation of the creditworthiness of the company since the uses cash interest on debt and not receivables. It is not enough for the company to make higher revenues, it must be efficient enough to convert those revenues into cash. 4 C’s of credit Character Kismet is owned by two shareholders, Stuart Trier and Aaron Anticic, each holding 50% of the business. Trier, 24, is the president of the company. He graduated with a bachelor of arts from the University of Western Ontario. He was enrolled in the administrative and commercial studies program at the University. He worked as an analyst at 3M Canada where his duty was to optimize service and inventory levels. He is self-motivated and energetic. Aaron, the Treasurer, is a graduate of Richard Ivey School of Business (University of Western Ontario) with a degree in business administration. He held a lecture position at the Richard Ivey School of Business and developed experience in small business management by managing his family’s restaurant during the summers. The company sells lower-priced tools to individuals and contractors. Its stores are located in Hamilton. It also operates a mobile tool show. The above analysis indicates that Kismet has an experienced management. Besides, the company is yet to acquire long-term debt. Capacity The financial statements indicate that it can borrow and repay the required amount of the loan. Its net income after tax for the second quarter was $67,292 while that for the first quarter was $11,274. The balance sheet shows that it has less debt. It had no long-term liabilities, and its total current liabilities was less than 50% of the total assets. Besides, its cash inflows were more than its cash outflows. Thus, it can repay $43,000 from the bank. Condition The company’s industry shows positive prospects and is expected to grow. The company’s additional investment is expected to increase its earnings. Interest rates are also stable and are not expected to change rapidly. Collateral The company’s fixed assets are inadequate to secure the entire amount of the loan. The net book value of the company’s fixed asset is only $6,000. If the bank lends the company the $43,000 required to purchase new fixed assets, only $6,000 of the amount will be secured. Alternative analysis Option 1 The first option the bank has is to Kismet the entire amount of the loan ($43,000) and allow the expansion of working capital loan (credit line) to $100,000. Pros: The advantage is that Kismet will get the required capital to finance its expansion. Expanded operations may lead to an increase in revenues and net income thus enhancing the return on investment. If the expansion is successful, Kismet will be able to repay the bank. Cons: Kismet will not provide collateral for the entire amount of the loan. The company’s fixed asset will only cover $6,000 of the $43,000 loan. Secondly, there is no guarantee that the bank will get back its money. Since most of the loan is not covered, the banks may lose the amount if the expansion is not successful. Option 2 The bank to refuse the loan application from kismet. The advantage is that the bank will not be at risk of losing the unsecured portion of the loan. However, it will be disadvantageous to Kismet since it will not be able to finance its expansion plans. Option 3 To give the loan on condition that the company’s sales increase. The bank may also wait for Kismet to find a large buyer for the expanded production. This will reduce the risk of loss to the bank. However, Kismet may not get the loan if the market conditions are not favorable. Recommendations As shown in the analysis, the company is financially stable. It is profitable, highly liquid and has a strong solvency. Evaluation of the 4Cs showed that company had a strong capital, collateral, and capacity to pay the debt. However, a loan of $43,000 will be higher than the company’s capacity. The bank should lend the company less than $43,000 or wait until the company secures buyers.

Compare and Contrast the Unification of Germany, Italy,...

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The Classical Period free essay sample

Getting its name from art history, the classic period in music extends from 1740 to 1 810 and includes the music of Haydn, Mozart, the first period of Beethoven, and Bachs sons. The classical period of music coordinated harmony, melody, rhythm, and orchestration more effectively then earlier periods of music. During the classical era the social function of music began to change from earlier aristocratic and religious connections toward more public and secular activities associated with the middle class.The rise of public concerts, the spread of immemorial opera houses, the growth of music publishing, the increased number of musical pieces composed and played were all direct effects of the changing musical times. Among the many musical types of the period, the classical period is best known for the symphony, a form of a large orchestral ensemble. The symphonic pieces generally had three movements, the sonata, the minuet, and the finale, Building of the achievements of earlier composers, Haydn, and Mozart brought the symphony to its peak in the last 20 years of the 18th century. We will write a custom essay sample on The Classical Period or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Haydn excelled in rhythmic drive ND development of theme-based music. Mozart also added to the symphony by contrasting memorable lyric themes in very full sounding orchestral settings. To satisfy the middle-class amateur, classic composers supplied a ton of new chamber music for all Imaginable combinations. The piano sonata became a very important form of chamber music, especially after being refined by Haydn, Mozart, and Beethoven. After 1765, the string quartet began to increasingly dominate the chamber music field.Unlike the concertos of the baroque period, the classic era mainly emphasized the LOL concerto. The choice of solo instrument, however, was somewhat broader then in the baroque era. There was more off trend during the classical period towards keyboard concertos. This style was originated In North Germany, by C,P. E. Bach, and gradually spread to other areas. Mozart took the concerto to Its greatest heights. HIS incomparable ability to weave the complex strands of the concerto fabric without entangling or obscuring either soloist or orchestra has never been surpassed. To match the larger forms and more complex requirements of classic music, the ate 18th-century orchestra gained both in size and variety of personnel. Composers increasingly employed pairs of woodwinds, now Including clarinets as well as flutes. , oboes, and bassoons. Large court orchestras, such as those In Vienna and Munich, numbered more then 50, but Heydays orchestra at Esters;z in 1783 consisted of only 24 players. Rhea Classical Period 1810 and includes the music of Haydn, Mozart, the first period of Beethoven, and generally had three movements, the sonata, the minuet, and the finale.

The Downfall Of Macbeth Was A Great Tragedy. He Knew It Was Not Right

The downfall of Macbeth was a great tragedy. He knew it was not right to kill the king, but he felt he had no other choice. He was trapped into doing wrong. Lady Macbeth gave him the evil ideas throughout the play. She was his driving force. Without her, Macbeth wouldn't have done what he did. Therefore, Lady Macbeth is as much of a main character as Macbeth is. Macbeth says, "Stars, hide your fires; Let not light see my black and deep desires"(1.4.57-58). Here he is expressing that while he does want to become king and may have a few evil thoughts of how to achieve that dream, he does not plan to act on them. It is not until Lady Macbeth talks to him that he is a bit more convinced. Speaking of King Duncan, she states, "O, never shall sun that morrow see!" (1.5.71-72), basically ordering Macbeth to murder him in their own house. Lady Macbeth is obviously the evil one. That is apparent when she gets Macbeth's letter and responds by saying, "Yet do I fear thy nature. It is too full of the milk of human kindness"(1.5.16-17). This shows that she knows Macbeth will not murder Duncan on his own. She takes matters into her own hands and decides to convince him. Macbeth opens scene seven by giving a long list of reasons not to kill King Duncan. He is his ruler and kinsman, his guest, and a virtuous king. With this list of reasons Macbeth slowly convinces himself not to commit the murder. He then informs Lady Macbeth of his decision to "proceed no further in this business"(1.7.34). Lady Macbeth challenges that and calls him a coward, not a man. She accuses him of going back on his sworn word to her, and with very violent language declares that she would dash out the brains of her own baby, had she promised to as Macbeth had promised to kill Duncan. She then assures Macbeth that failure is impossible, at which point Macbeth is convinced once again to kill the king. Macbeth had resolved not to kill the king after much thinking about it, but Lady Macbeth persuaded him to do it. Not only did Lady Macbeth convince her husband to murder King Duncan, but she also made the arrangements to make it possible. At the beginning of Act two, scene two Lady Macbeth informs us that the guards are thoroughly intoxicated. She goes on to say, "I laid their daggers ready; He could not miss ?em"(2.2.15-16). Lady Macbeth made all the arrangements necessary for the murder of King Duncan, so that all Macbeth had to do was perform the act. In conclusion, Lady Macbeth convinced Macbeth to murder Duncan, convinced him again when he was unsure, and made all the proper arrangements which is why Lady Macbeth is as much of a main character of the play as Macbeth himself is. Macbeth did not want to murder Duncan in the first place until his wife talked him into it. Then, when he changed his mind, Lady Macbeth taunted him until he agreed once again to murder the king. Finally, Lady Macbeth made sure that everything was set up for the murder. On the surface it would appear that Macbeth was responsible for the murder since he committed the crime, but when more is read into it, it becomes clear that Lady Macbeth was more responsible.