Reference no: EM131225065
Question: Directions: Answer the following questions on a se...
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 Income Statement 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
|
|
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
|
|
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
|
1. What is the free cash flow for 2014?
2. Suppose Congress changed the tax laws so that Berndt's depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow?
3. 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?
4. Use the extended DuPont equation to provide a summary and overview of company's financial condition as projected for 2014. What are the firm's major strengths and weaknesses.
|
Advantages and disadvantages of private sector options
: Discuss one or more of the issues associated with those questions in light of your own value system and beliefs. How can the
|
|
Describe at least three ways a person can teach
: Describe at least three ways a person can teach by example according to the article and provide a personal example in which you have demonstrated this concept. Explain how "teaching by example" influences the development of ethical and moral reas..
|
|
Supply chain manager for midstream natural gas company
: MEB-7173 - Operations Management - You are the Supply Chain Manager for a Midstream natural gas company. Your latest customer is an E&P company active in the Bakken Shale in a North Dakota.
|
|
What is the standard error of the sampling distribution
: What is the standard error of the sampling distribution? What is the probability that the sample mean will be less than 31 days for reimbursement? What is the probability that the sample mean will indicate between 35 and 45 days for reimbursement?
|
|
What can you say about the companys liquidity position
: 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?
|
|
Regarding the format of the multi-step income statement
: Identify the false statement regarding the format of the multi-step income statement:
|
|
Compare to the companys credit terms
: Contemporary Media Sign Company sells on account. Recently, Contemporary reported the following figures: Requirements Compute Contemporary’s days’ sales in receivables for 2013. Suppose Contemporary’s normal credit terms for a sale on account are “2/..
|
|
Find the probability that the daily output
: The daily output of a production line varies according to a normal distribution with a mean (µ ) of 163 units and a standard deviation (σ ) of 3.5.Find the probability that the daily output will fall below 160 units. Find the probability that..
|
|
Discuss the lawsuit in the notes to the financials
: My company is being sued for $1,000,000. We are fighting the lawsuit and believe we will be successful in beating the lawsuit but it will likely cost us $100,000 in attorney bills and associated costs. Even though we think we will beat the lawsuit, w..
|