What is the free cash flow

Assignment Help Financial Accounting
Reference no: EM13858217

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?

Reference no: EM13858217

Questions Cloud

Conduct an informal interview : Conduct an informal interview, focusing on the participant's developmental history. Consider the following: Family history and background and School environment and educational experience
Determine the power generation in watts per unit : The space between the two concentric cylinders is evacuated. Assuming diffuse, gray surfaces, determine the heat transfer rate per unit area of the outer cylinder. The electrical output of the semiconductor surface is 10% of the absorbed irradiati..
Define about wireless computing : about wireless computing
Paper on gender differences in infancy and childhood : Choose one of the following topics and write a 1,000-1,500 word paper summarizing the current professional literature on the topic
What is the free cash flow : 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?
Calculate the material costs per unit of a special motor : Calculate the material costs per unit of a special motor for alternative order quantities between 1 unit and 1,000 units! Please apply on the one hand the surcharge rate calculation and on the other hand the method of activity based costing!
Determine the heat removal rate w by the coolant : A small aperture is located at the bottom of the enclosure to permit sighting of the sample or the enclosure wall. The spectral reflectivity PA of an opaque, diffuse sample material is as shown. The heat transfer coefficient for convection between..
Which of the following parties has a legal contract : Question 1: Which of the following parties has a legal contract?
Identification of the data needed : Data Collection and Research Analysis Methods- Identification of the data needed, How the data will be collected for the before and the after solution states and Measuring of that data

Reviews

Write a Review

Financial Accounting Questions & Answers

  Balance scorecard is designed mostly for shareholders

The balance scorecard is designed mostly for shareholders as a means to continuously monitor a manager's performance. A balance scorecard (BSC) has four perspectives; vendors, internal processes, innovation and learning, and financial.

  Interest rate to fund his retirement goal

George Just hit the jackpot in Las Vegas and won $55,000! if he invests it now, at a 12% interest rate, how much will it be worth 15 years from now? Zach would like to have $4,000,000 saved by the time he retires 40 years from now. How much does he n..

  Determine the positions taken by amos and susan

Determine the positions taken by Amos and Susan and by the IRS agent with respect to the Lear jet deduction.

  On the first day of its fiscal year ramsey company issued

on the first day of its fiscal year ramsey company issued 35000000 of 10-year 9 bonds to finance its operations.

  Calculate your net gain or loss for each stock

Develop the appropriate charts that highlight your performance. You will create a minimum of two (2) charts and determine how much money you earned or lost with each stock on a daily basis.

  Find amount of bobs bonus

Find amount of Bob's bonus if the bonus is to be evaluated on income before deducting salary and interest on capital accounts, but after the bonus?

  Question 1 capital expenditure decisions and investment

question 1 capital expenditure decisions and investment criteria - morten ltdin recent years morten ltd a company that

  Who cares about the income statement

The balance sheet tells me about the cash the company's got; the cash flow statement tells me about its changes in cash. Who cares about the income statement?

  Profit margin and investment turnover ratios

The Chewy Chocolate Division of the Delight Confection Company had a rate of return on investment (ROI) of 12 percent (= $1,200,000/$10,000,000) during Year 5,  Break down the ROI for Year 5 and Year 6 into profit margin and investment turnover ratio..

  Describe ways in which the information produced

Describe ways in which the information produced through the accounting cycle is used by a company's management and employees.

  Calculate the vertical analysis for total current assets

Calculate depreciation at each year end that applies straight-line method and units of production method - Calculate the total cost for each purchase date

  What are pace taxable income and income tax liability

What are Pace’s taxable income and income tax liability, assuming qualified production activities income is $55,000?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd