Magnet Beauty Financial Analysis
1. List at least five motivations for leasing instead of buying in general. (The answer
should be different than the motivations listed in chapter PPT).
2. Which one, 3+2 lease or 5 one-year lease, is likely to be considered as an
operating lease? Why?
3. What are the arguments in favor of 3+2 lease contract? It needs to explain the
factors more than finance only.
4. What are the arguments in favor of 5 one-year lease contract? It needs to
explain the factors more than finance only.
5. (1) Calculate the ROA, ROE, Leverage (using total Liabilities instead of debt) and
interest coverage in years 1-5 under two options. (tip: use the formula of the
ratios in the first half part of the textbook) Magnet Beauty Financial Analysis Help
(2) By comparing these ratios, analyze how the trend of these financial ratios are
different in the two options?
6. Using the information in the exhibits, compare the impact of Magnet Beauty’s two
lease options on their income statement, balance sheet, and cash flow statements
for each of the years presented. Identify two significant different items in the
statements under the two different options over the years. Then list the different
items and explain the reasons for being different.
7. Which option should the CEO select, and why? Magnet Beauty Financial Analysis Help
8. Will your decision be the same or different if Magnet were a public company?
Why? (The answer should include, but is not limited to, why do companies
respond this way? Why do they care so much about the reported accounting
numbers? Both contracting and stock market motivations will be addressed.)
9. Exhibit 8 shows the expected impact of the new rules on different industries.
What are the reasons that there is a big impact on the first few industries in the
table versus a much smaller impact on the last few industries in the table?
For Magnet Beauty Financial Analysis Help please click here