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Module 2: Reformulation of Accenture

Module 2: Reformulation of Accenture. Kevin Overholt 1/22/2014. Enterprise of Accenture. Primarily a consulting services firm Reliant on two main investments R+D Employees Large amounts of cash, primarily held abroad Nearly no long-term debt Collecting A/R has been a problem.

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Module 2: Reformulation of Accenture

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  1. Module 2: Reformulation of Accenture Kevin Overholt 1/22/2014

  2. Enterprise of Accenture • Primarily a consulting services firm • Reliant on two main investments • R+D • Employees • Large amounts of cash, primarily held abroad • Nearly no long-term debt • Collecting A/R has been a problem

  3. Accenture: SWOT Analysis http://yousigma.com/comparativeanalysis/accentureltd.html

  4. Enterprise Assets EA: $11,331,600 • Items of Dispute: • Cash or 2% of Sales? • Short-Term Investments • Long-Term Investments • Goodwill

  5. Enterprise Liabilities EL: $11,413,620 • Items of Dispute: • Accrued Payroll + Benefits • Long-Term Deferred Revenues • Retirement Obligation

  6. Accenture PLC Computation of Net Enterprise Assets

  7. Why Negative NEA? • Four-Year Average = $(851,082) • Mainly due to the difference in Net Cash and Cash Equivalents and 2% of Sales • Accenture holds large sums of cash for: • Potential Acquisitions • R+D Costs • Tax Reasons (Repatriated Foreign Income)

  8. Financial Assets FA: $5,023,999 • Items of Dispute: • Cash or 2% of Sales?

  9. Financial Liabilities FL: $1,344,869

  10. Accenture PLC Computation of Net Financial Liabilities

  11. Why Negative Net Financial Liabilities? • Four Year Average = $(3,809,156) • This is due to the large sums of cash held by Accenture • Positive: Own capital to finance own projects without debt restrictions • Negative: Sitting cash not reinvested • Could be viewed as a Positive Net Financial Asset (NFA)

  12. Enterprise Profit After Tax Provision for Income taxes changed to $767,412 784,775 + (-32,893-14,035)*.37 = 767,412

  13. Enterprise Profit After Tax

  14. Accenture PLC Computation of Enterprise Profit After Tax

  15. Financing Expense After Tax Remaining Provision for Income taxes is $17,363

  16. Financing Expense After Tax

  17. Accenture PLC Computation of Financing Expense After Tax

  18. Further Questions • Does Accenture ever plan on repatriating their large sums of cash? • Where is the interest income/interest expense generated/incurred? • What is Accenture’s internal rate of return on projects? • Why don’t they add debt to increase financial leverage?

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