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FIN 534 – Homework Set #1
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 | page1image16968 $9,000 | $7,282 | $14,000 | ||
Short-term investments | page1image21696 48,600 | 20,000 | 71,632 | ||
Accounts receivable | page1image26424 351,200 | 632,160 | 878,000 | ||
Inventories | page1image31112 715,200 | 1,287,360 | 1,716,480 | ||
Total current assets | page1image35880 $1,124,000 | $1,946,802 | $2,680,112 | ||
Gross fixed assets | page1image40648 491,000 | 1,202,950 | 1,220,000 | ||
Less: Accumulated depreciation | page1image45416 146,200 | 263,160 | 383,160 | ||
Net fixed assets | page1image50184 $344,800 | $939,790 | $836,840 | ||
Total assets | page1image55368 $1,468,800 page1image56616 | $2,886,592 | $3,516,952 | ||
page1image61960 page1image62280 | |||||
Liabilities and Equity | |||||
Accounts payable | $145,600 | $324,000 | page1image69136 page1image69456 page1image69616 | $359,800 | page1image71224 |
Notes payable | 200,000 | 720,000 | page1image74736 page1image74896 300,000 | ||
Accruals | 136,000 | 284,960 | page1image79136 page1image80096 page1image80256 380,000 | ||
Total current liabilities | $481,600 | $1,328,960 | page1image84576 page1image85536 page1image85696 $1,039,800 | ||
Long-term debt | 323,432 | 1,000,000 | page1image91112 page1image92072 page1image92232 500,000 page1image93000 | ||
Common stock (100,000 shares) | 460,000 | 460,000 | page1image96192 1,680,936 page1image97392 | ||
Retained earnings | 203,768 | 97,632 | page1image103160 page1image103320 296,216 | ||
Total equity | $663,768 | $557,632 | page1image107416 page1image107576 $1,977,152 | ||
Total liabilities and equity | $1,468,800 page1image112144 | $2,886,592 | page1image113840 page1image114800 page1image114960 $3,516,952 page1image115728 | ||
© 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 | page2image14168 | $7,035,600 | page2image15936 |
Cost of goods sold except depr. | 2,864,000 | 4,980,000 | page2image18920 | 5,800,000 | page2image20096 |
Depreciation and amortization | 18,900 | 116,960 | page2image24328 | 120,000 | page2image25504 |
Other expenses | 340,000 | 720,000 | page2image29696 | 612,960 | page2image30872 |
Total operating costs | $3,222,900 | $5,816,960 | page2image35104 | $6,532,960 | page2image36280 |
EBIT | $209,100 | $17,440 | page2image40432 | $502,640 | page2image41608 |
Interest expense | 62,500 | 176,000 | page2image47008 | 80,000 | page2image48344 |
EBT | $146,600 | ($158,560) | page2image51128 | $422,640 | page2image52304 |
Taxes (40%) | 58,640 | -63,424 | page2image56496 | 169,056 | page2image57664 |
Net income | page2image59960 page2image60384 $87,960 page2image61312 page2image61896 | ($95,136) | page2image63352 page2image63672 page2image63832 | $253,584 | page2image65440 page2image65600 |
Other Data | page2image72712 page2image73296 2012 | 2013 | page2image75352 2014 |
Stock price | page2image78392 page2image78816 $8.50 | $6.00 | page2image80616 page2image81040 $12.17 |
Shares outstanding | page2image83312 page2image83736 100,000 | 100,000 | page2image85536 page2image85960 250,000 |
EPS | page2image88192 page2image88616 $0.88 | ($0.95) | page2image90416 page2image90840 $1.104 |
DPS | page2image93520 page2image93944 $0.22 page2image94872 page2image95296 | 0.11 | page2image96512 page2image96936 0.22 page2image97864 page2image98288 |
Tax rate | 40% | 40% | 40% |
Book value per share | $6.64 | $5.58 | $7.909 |
Lease payments | $40,000 page2image110640 | $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 | page3image7448 page3image7872 Industry Average |
Current | 2.3 | 1.5 | 2.7 |
Quick | page3image15912 page3image16336 0.8 | page3image17392 0.5 | page3image18552 1.0 |
Inventory turnover | page3image20928 page3image21352 4 | page3image22408 4 | page3image23568 6.1 |
Days sales outstanding | page3image25984 page3image26408 37.3 | page3image27464 39.6 | page3image28624 32.0 |
Fixed assets turnover | page3image31040 page3image31464 10 | page3image32520 6.2 | page3image33680 7.0 |
Total assets turnover | page3image36096 page3image36520 2.3 | page3image37576 2 | page3image38736 2.5 |
Debt ratio | page3image41560 page3image41984 35.60% page3image42912 page3image43336 | page3image43632 59.60% page3image44664 | page3image45224 32.0% page3image46256 |
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. No changes 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 financial condition 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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