Friday, July 18, 2014

AbbVie Acquires Shire

U.S. pharmacuetical company AbbVie announced that Shire Plc has agreed to be acquired for about $54.7 billion. For AbbVie, the acquisition gives the company Shire's portfolio of expensive medicines, which is needed since AbbVie's Humira, the world's best-selling prescription, loses patent protection in 2016. With any acquisition, you would expect synergies, however, the most important synergy for AbbVie may be that the acquisition will allow the company to relocate to Ireland, which could reduce its tax bill from 22 percent to 13 percent.

Wednesday, July 16, 2014

Capital Expenditures Slow

Capital expenditures fell by three percent in the first quarter of 2014, to an annualized value of $1.8 trillion. With the lower capital expenditures, the financing gap (think external financing needed) was a negative $77.4 billion, the 21st consecutive negative quarter. U.S. nonfinancial companies issued $4.873 trillion in new debt during the quarter and spent about one-half of that repurchasing equity.

Wednesday, July 9, 2014

Creating Charts In Excel

While you have done a great job with your data analysis, a chart or graph is often the best way to convey the information. And while we think Excel Master does a good job introducing you to Excel's charting capabilities, for more on creating charts and graphs in Excel, check out this article from PCWorld.

Tuesday, July 8, 2014

Junk Bond Issuance Grows

The Bank of America Merrill Lynch Global High Yield Index began in 1997 and 12 years later, the value of junk bonds in the index reached $1 trillion. In the last four years, another $1 trillion has been added. During 2013, a record $477 billion in junk bonds were issued, and, so far this year, $338 billion in junk bonds have been issued. A major factor that is causing the rapid increase in junk bond issuance is the "reach-for-yield," that is, investors are looking for a yield on debt in the near zero government bond environment.  Additionally, Moody's measure of the the strength of junk bond covenants is the weakest since the company began tracking covenants in 2011.

Big Projects, Big Problems

A recent article in CFO states that schedules on capital budgeting projects are missed by an average of 55 percent and budgets are missed by 33 percent. One potential problem for capital budgeting is that most projects are evaluated by project advocates within the company, who are often biased in favor of the project. For example, a financial services company found that the initial cost projections for its projects were off by a factor of 2.37, meaning that for every dollar originally projected to begin the project, it actually cost $2.37. A second problem is that small and large projects are evaluated the same way, especially in regards to timing. For example, consider you and three friends are going to dinner together, each from a different starting location. Each of you has a 50 percent probability of arriving on time. What is the probability that you will all arrive on time for dinner? While you might think that it is 50 percent, it is actually 6.25 percent (.50 × .50 × .50 × .50)! In a large project, with intermediate tasks that are dependent on preceding tasks, it is easy to get behind schedule very quickly. 

That's The Way The Cupcake Crumbles

Cupcake company Crumbs announced that it would file a Chapter 7 liquidation. Crumbs, which was founded in 2003 and went public in 2011, had 65 stores in 12 states. The company sold cupcakes in flavors such as Cookie Dough and Girl Scout Thin Mint. For the first quarter of 2014, the company lost $3.8 million, a sharp increase from the 2013 first quarter loss of $2 million.

Wednesday, June 18, 2014

Corporate Tax Rates

The U.S corporate tax code is a hot button issue, with some arguing for higher tax rates and others arguing for lower tax rates. No matter which side you fall, one thing is certain: Companies have left the U.S. for countries with lower tax rates. For example, Medtronic recently announced plans to purchase Covidien and move the company's operations to Ireland. While the official top marginal tax rate in the U.S. is 35 percent, a recent study by S&P indicates that the effective corporate tax rate for the U.S. in 2012 was 32.3 percent. By way of comparison, the effective tax rate in Switzerland is 22.4 percent, in the U.K. it is 26.4 percent, and in Spain it is 26.5 percent.

There is another interesting statistic in the article that we want to make sure that you didn't overlook. Overseas revenues now account for about 48 percent of all revenue earned by S&P 500 companies.