Financial Statements Evaluation: Lightweight Metals Technology

Discuss about the Financial Statements Evaluation for Lightweight Metals Technology.

 

Financial Statements	2016	2015	2014 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper
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 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).

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).

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.

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%

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%

The essay is indented to conduct an evaluation on Alcoa stock and computation regarding return rate of the company’s 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 Aloca’s CEO, it was the appropriate time for attaining split. The company’s 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 organization’s decision of splitting Aloca’s shareholders might attain 80.1% shares in fresh shares (Chauhan and Singh 2014). Aloca might acquire 85% of the organization’s shareholding worth $9 billion in the debt form by offering support to Alcoa’s 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 company’s liquidity position.

After evaluating the financial situation of Alcoa’s 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 company’s another division is focused on automotive and aerospace and the transportation industry in attempt to attain increased return and revenue.

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 Added’Add Value?. Journal of European Competition Law & Practice, p.lpw015.

Dumont, G. and Schmit, M., 2013. Tier 1 MFIs Financial Performance: Cash-flow statement analysis (No. 13-054). ULB–Universite Libre de Bruxelles.

Frattini, F., Dell’Era, C. and Rangone, A., 2013. Launch Decisions and the Early Market Survival of Innovations: An Empirical Analysis of the Italian Mobile Value‐Added Services (VAS) Industry. Journal of Product Innovation Management, 30(S1), pp.174-187.

Golez, B., 2014. Expected returns and dividend growth rates implied by derivative markets. Review of Financial Studies, 27(3), pp.790-822.

Healy, P.M. and Palepu, K.G., 2012. Business Analysis Valuation: Using Financial Statements. Cengage Learning.

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