What would happen to reported profit and to net cash flow

Reference no: EM131349292

Assignment

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.

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 $481,600	284,960 $1,328,960	380,000 $1,039,800
Total current liabilities	136,000 $481,600	284,960 $1,328,960	380,000 $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 Total liabilities and equity	$663,768 $1,468,800	$557,632	$1,977,152
Total equity Total liabilities and equity	$663,768 $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 ₁	($95,136)	$253,5 4

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: EM131349292

Questions Cloud

What is the expected return on portfolio : You own a portfolio that is 17 percent invested in Stock X, 32 percent in Stock Y, and 51 percent in Stock Z. The expected returns on these three stocks are 12 percent, 15 percent, and 17 percent, respectively. What is the expected return on the port..

Strategic marketing plan : For the final Portfolio Project you will submit a written paper developing an organization's strategic marketing plan that you could share with the organization's board of directors. You may wish to choose the organization you work for currently ..

State of economy probability-calculate the expected return : What are the portfolio weights for a portfolio that has 170 shares of Stock A that sell for $91 per share and 145 shares of Stock B that sell for $110 per share? Consider the following information: State of Economy Probability of State of Economy Por..

Types of project management approaches : Provide description of which types of project management approaches are used by your HSO or an HSO with which you are familiar.

What would happen to reported profit and to net cash flow : FIN 534- 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?

Write application of propositions in employee development : Write the Application of Propositions in Employee Development of IT Employees in Telecom Industry :(A Study with reference to Sultanate of Oman)

Develope an evaluation plan and disseminating results : NRS-441V : Professional capstone project - developing an evaluation plan and disseminating results.Discuss why you need to be aware of the reliability and validity of the data collection tool that you are using in quantitative research project.

Resources pertaining to your public health issue : You chose a public health issue to focus on for your final project. This week, you will review resources for Section I of the final project - Explain the relevance of each resource. How does each resource connect to your topic?

Select an environmental factor that poses a threat : Select an environmental factor that poses a threat to the health or safety of infants.Explain how the environmental factor you selected can potentially affect the health or safety of infants.Offer recommendations on accident prevention and safety pr..

User Account

All Pages