Posted: January 13th, 2016
Use the following information for Questions 1 through 4:
Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.
Use the following information for Questions 1 through 4:
Assume that you recently graduated and have just reported to work as an investment advisor at the one of the firms on Wall Street. You have been presented and asked to review the following IncomeStatement and Balance Sheets of one of the firm’s clients. Your boss has developed the following set of questions you must answer.
Income Statements and Balance Sheet
|
Balance Sheet |
2012 |
2013 |
2014 |
||
|
Cash |
$9,000 |
$7,282 |
$14,000 |
||
|
Short-term investments |
48,600 |
20,000 |
71,632 |
||
|
Accounts receivable |
351,200 |
632,160 |
878,000 |
||
|
Inventories |
715,200 |
1,287,360 |
1,716,480 |
||
|
Total current assets |
$1,124,000 |
$1,946,802 |
$2,680,112 |
||
|
Gross fixed assets |
491,000 |
1,202,950 |
1,220,000 |
||
|
Less: Accumulated depreciation |
146,200 |
263,160 |
383,160 |
||
|
Net fixed assets |
$344,800 |
$939,790 |
$836,840 |
||
|
Total assets |
$1,468,800 |
$2,886,592 |
$3,516,952 |
||
|
Liabilities and Equity |
|||||
|
Accounts payable |
$145,600 |
$324,000 |
$359,800 |
||
|
Notes payable |
200,000 |
720,000 |
300,000 |
||
|
Accruals |
136,000 |
284,960 |
380,000 |
||
|
Total current liabilities |
$481,600 |
$1,328,960 |
$1,039,800 |
||
|
Long-term debt |
323,432 |
1,000,000 |
500,000 |
||
|
Common stock (100,000 shares) |
460,000 |
460,000 |
1,680,936 |
||
|
Retained earnings |
203,768 |
97,632 |
296,216 |
||
|
Total equity |
$663,768 |
$557,632 |
$1,977,152 |
||
|
Total liabilities and equity |
$1,468,800 |
$2,886,592 |
$3,516,952 |
||
© 2015 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University.
FIN 534 Homework Set #1 1156 (5-19-2015) Page 1 of 3
FIN 534 – Homework Set #1
|
Income Statements |
2012 |
2013 |
2014 |
||
|
Sales |
$3,432,000 |
$5,834,400 |
$7,035,600 |
||
|
Cost of goods sold except depr. |
2,864,000 |
4,980,000 |
5,800,000 |
||
|
Depreciation and amortization |
18,900 |
116,960 |
120,000 |
||
|
Other expenses |
340,000 |
720,000 |
612,960 |
||
|
Total operating costs |
$3,222,900 |
$5,816,960 |
$6,532,960 |
||
|
EBIT |
$209,100 |
$17,440 |
$502,640 |
||
|
Interest expense |
62,500 |
176,000 |
80,000 |
||
|
EBT |
$146,600 |
($158,560) |
$422,640 |
||
|
Taxes (40%) |
58,640 |
-63,424 |
169,056 |
||
|
Net income |
$87,960 |
($95,136) |
$253,584 |
||
|
Other Data |
2012 |
2013 |
2014 |
|
Stock price |
$8.50 |
$6.00 |
$12.17 |
|
Shares outstanding |
100,000 |
100,000 |
250,000 |
|
EPS |
$0.88 |
($0.95) |
$1.104 |
|
DPS |
$0.22 |
0.11 |
0.22 |
|
Tax rate |
40% |
40% |
40% |
|
Book value per share |
$6.64 |
$5.58 |
$7.909 |
|
Lease payments |
$40,000 |
$40,000 |
$40,000 |
© 2015 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University.
FIN 534 Homework Set #1 1156 (5-19-2015) Page 2 of 3
FIN 534 – Homework Set #1
|
Ratio Analysis |
2012 |
2013 |
Industry Average |
|
Current |
2.3 |
1.5 |
2.7 |
|
Quick |
0.8 |
0.5 |
1.0 |
|
Inventory turnover |
4 |
4 |
6.1 |
|
Days sales outstanding |
37.3 |
39.6 |
32.0 |
|
Fixed assets turnover |
10 |
6.2 |
7.0 |
|
Total assets turnover |
2.3 |
2 |
2.5 |
|
Debt ratio |
35.60% |
59.60% |
32.0% |
|
Liabilities-to-assets ratio |
54.80% |
80.70% |
50.0% |
|
TIE |
3.3 |
0.1 |
6.2 |
|
EBITDA coverage |
2.6 |
0.8 |
8.0 |
|
Profit margin |
2.60% |
−1.6% |
3.6% |
|
Basic earning power |
14.20% |
0.60% |
17.8% |
|
ROA |
6.00% |
−3.3% |
9.0% |
|
ROE |
13.30% |
−17.1% |
17.9% |
|
Price/Earnings (P/E) |
9.7 |
−6.3 |
16.2 |
|
Price/Cash flow |
8 |
27.5 |
7.6 |
|
Market/Book |
1.3 |
1.1 |
2.9 |
- What is the free cash flow for 2014?
- Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. Nochanges in operations occurred. What would happen to reported profit and to net cash flow?
- Calculate the 2014 current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company’s liquidity position in 2013?
- Use the extended DuPont equation to provide a summary and overview of company’s financialcondition as projected for 2014. What are the firm’s major strengths and weaknesses?
© 2015 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University.
FIN 534 Homework Set #1 1156 (5-19-2015) Page 3 of 3
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