Financial Analysis : 9 Questions

Reporting and Valuation for Undergraduates

1

Below is a 2-part question. Please create a word document and/or spreadsheet to answer the following prompts. Upload your response according to the directions.

Part I: Reporting and Financial Statement Analysis

1. Given the following income statements, calculate the estimated cash flow for years 20x1 and 20x2.

2. Given the following income statements, calculate the interest coverage (time interest earned) ratio for years 20x1 and 20x2.

3. Given the following income statements, calculate the net profit margin ratio for years 20x1 and 20x2.

Income Statement for years 20x1 and 20x2 20x1 20x2 Sales $5,450 $5,000 Operating Costs excluding Depreciation and Amortization 4,775 4,250 EBITDA 675 750 Depreciation and Amortization 40 180 EBIT $635 $570 Interest Expense 62 200 EBT $573 $370 Taxes (40%) 229 148 NI $344 $222 4. Based solely on the following balance sheets, calculate the current ratio for years 20x1 and 20x2?

5. Based solely on the following balance sheets, calculate the debt ratio for years 20x1 and 20x2.

Balance Sheet ending December 31 for years 20x1 and 20x2 20x1 20x2 Assets: Cash $275 $250 Short Term Investments 55 50 Accounts Receivable 375 250 Inventories 825 750 Total Current Assets $1,530 $1,300 Net Plant and Equipment 2,925 2,750 Total Assets $4,455 $4,050 Liabilities: Notes Payable $192 $100 Accounts Payable 580 100 Miscellaneous Payables 245 250 Total Current Liabilities $1,017 $450 Long-Term Debt 550 500 Total Liabilities $1,567 $950

Reporting and Valuation for Undergraduates

2

Common Stock 2154 2,600 Retained Earnings 734 500 Less Treasury Stock 46 0 Total Shareholder Equity $2,888 $3,100 Liabilities and Shareholder Equity $4,455 $4,050 6. Based on both the income statements and balance sheets, calculate the return on assets (return on

investment) ratios for years 20x1 and 20x2.

7. Based on both the income statements and balance sheets, calculate the total asset turnover ratio for years 20x1 and 20x2.

Part II: Capital Budgeting and Financing Considerations

8. Given the following cash flows of two mutually-exclusive projects, A and B, calculate the NPV for each project. Both Project A and Project B have an estimated cost of capital of 10%. Cash flows will be realized at the end of each time period. Which, if either, project should be accepted? Why? Explain.

9. Are there other methods of choosing between projects? If so, explain them.

Year, t A B 0 -2,000 -1,000 1 200 800 2 400 700 3 1,000 500 4 1,400 200 5 1,600 100