1) The detailed information is on the second tab marked "Financials". Enter summarized Balance Sheet and Income Statement information for Cummins into the template on the "Summary" tab for years 2008 to 2010. Use the field "All Other Items" for tying out the various financial sections. Be sure to balance.
2) Calculate the most recent two year CAGR (ie from 2008 to 2010) for all lines Remember that CAGR is the compound annual growth rate (ie that the growth from 2008 to 2010 would be the ((2010 figure/2008 figure) ^0.5)-1
3) Forecast next two years (2011 and 2012) Balance Sheet and Income Statement by using 1.05X (i.e. 105%) of the calculated CAGR for each line in #2 (in other words, if the CAGR is 10%, 105% of CAGR would be 10.5% as your growth rates. Remember growth rates can be negative as well). Do not forecast the total lines, such as Total Assets or Net Income - calculate them from their forecasted component lines. Plug cash to make balance sheet balance after forecasting all other lines.
4) Calculate common sized income statement and common sized balance sheet where indicated
5) Calculate the following ratios for all 5 years: (be sure to use averages where applicable )
a. Cash ratio
b. Quick ratio
c. Current ratio
d. Debt to Equity
e. Days Receivables
f. Days Inventory
g. Days Payable
h. Net working capital
6) Calculate cash conversion cycle for 2008-2012 (discussed in class but also see pages 800-804 - also known as simply the Cash Cycle)
7) Using 2008 as baseline, how much additional cash is being used/has been freed up by 2010 (i.e. the difference in net working capital)
8) Using a cost of funds of 10%, what is the additional cost/benefit in 2010 versus 2008 from to the change in net working capital (ie, if you say that funding working capital costs them 10%, how much more are they paying in costs due to the additional working capital, or saving if there is less working capital)
9) Using 2010 interest expense and both ST and LT debt levels, what is the company's actual interest expense rate as a %? (note, this may be a low interest rate - big companies typically can take advantage of very low rates or have special financing on certain items).
10) If the company wanted to pay off all its Short-term and Long-term debt over a ten year period by making equal quarterly payments at its current interest rate calculated in #9, what would be the size of those payments?