Financial Statement Analysis

Case Study #1 BUS 530 Financial Management

Joshua & White Technologies: December 31 Balance Sheets (Thousands of Dollars)

Assets 2017 2016 Cash and cash equivalents $21,000 $20,000 Short-term investments 3,759 3,240 Accounts Receivable 52,500 48,000 Inventories 84,000 56,000 Total current assets $161,259 $127,240 Net fixed assets 218,400 200,000 Total assets $379,659 $327,240

Liabilities and equity Accounts payable $33,600 $32,000 Accruals 12,600 12,000 Notes payable 19,929 6,480 Total current liabilities $66,129 $50,480 Long-term debt 67,662 58,320 Total liabilities $133,791 $108,800 Common stock 183,793 178,440 Retained Earnings 62,075 40,000 Total common equity $245,868 $218,440 Total liabilities and equity $379,659 $327,240

Joshua & White Technologies December 31 Income Statements (Thousands of Dollars)

2017 2016 Sales $420,000 $400,000 COGS except excluding depr. and amort. 300,000 298,000 Depreciation and Amortization 19,660 18,000 Other operating expenses 27,600 22,000 EBIT $72,740 $62,000 Interest Expense 5,740 4,460 EBT $67,000 $57,540 Taxes (40%) 26,800 23,016 Net Income $40,200 $34,524

Common dividends $18,125 $17,262 Addition to retained earnings $22,075 $17,262

Other Data 2017 2016 Year-end Stock Price $90.00 $96.00 # of shares (Thousands) 4,052 4,000 Lease payment (Thousands of Dollars) $20,000 $20,000 Sinking fund payment (Thousands of Dollars) $5,000 $5,000

Perform a ratio analysis for 2017 and 2016 and then answer questions a, b, c below.

Case Study #1 BUS 530 Fall 2018 Problem 1

Ratio Analysis 2017 2016 Industry Avg Liquidity Ratios Current Ratio 2.58 Asset Management Ratios Inventory Turnover (Total COGS/Inventories) 7.69 Days Sales Outstanding 47.45 Debt Management Ratios Debt Ratio (Total debt-to-assets) 20.0% Profitability Ratios Profit Margin 8.86% Return on Assets 10.93% Return on Equity 16.10% Market Value Ratios Earnings per share NA Price-to-earnings ratio 10.65

a. Has Joshua & White's liquidity position improved or worsened? Explain.

b. Has Joshua & White's ability to manage its assets improved or worsened? Explain.

c. How has Joshua & White's profitability changed during the last year?

Case Study #1 BUS 530 Fall 2018 Problem 1

Case Study #1 BUS 530 Financial Management

Joshua & White Technologies: December 31 2017 Free Cash Flow Analysis (Thousands of Dollars)

NOPAT $43,644

NOWC $157,500 $124,000

$46,200 $44,000 $111,300 $80,000 $31,300

Long Term Capital $218,400 $200,000 $18,400

Free Cash Flow ($6,056)

Uses of Free Cash Flow dividends $18,125 ST Inv. $519 stock -$5,353 interest $3,444 debt -$22,791

‐$6,056

As a manager of this firm, name three strategies you would initiate to produce positive Free Cash Flow

Case Study #1 BUS 530 Fall 2018 Problem 2

Case Study #1 BUS 530 Financial Management

Joshua & White Technologies: 2018 AFN Analysis (Thousands of Dollars)

AFN Analysis 2018 Delta Sales +10% $462,000 Assets $417,624.9 $37,965.9 COL $50,820.0 $4,620.0 Profit $44,220.00 Dividends $19,937.50 Retained Earnings $24,282.50

AFN $9,063.40

As a manager of this firm, what two strategies you would use to eliminate the need for external financing. Please provide actual dollar amounts to your analysis.

Case Study #1 BUS 530 Fall 2018 Problem 3