Compuite current and quick ratios based on projected balance

Reference no: EM131343659

Assignment

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.

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	$9,000	87.282	814,000
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	31.946.802	32.680.112
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	32.886.592	$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	284,960	380.000
Total current liabilities	5481.600	51.328.960	$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	$663,768	$557,632	31.977.152
Total liabilities and equity	91.468.800	32.886.592	33.516.952

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	56.532.960
EBIT	$209.100	517.440	5502.640
Interest expense	62,500	176,000	80.000
EBT	$146,600	($158.560)	5422.640
Taxes (40%)	58,640	-63,424	169.056
Net income	$87,960	(595.136)	$253,584

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	55.58	57.909
Lease payments	$40,000	540.000	540.000

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: EM131343659

Questions Cloud

Determine risk level of stock from investors point of view : Based on your financial review, determine the risk level of the stock from your investor's point of view. Indicate key strategies that you may use in order to minimize these perceived risks.

Oxidation of one molecule of glucose harvests : 1. The complete oxidation of one molecule of glucose harvests approximately 99% of the potential energy. ____ 2. All of the enzymes during gycolysis and the tricarboxylic acid cycle are not allosteric due to the multitude of potential coenzymes pr..

Calculate the change in internal energy : Calculate the change in internal energy(delta E) for a system that is giving off 25.0kJ of heat and is changing from 6.00L to 12.00L in volume at 1.50atm pressure. (101.3J=1 L*atm)

What is the value of the bond conversion option today : The manager of a young firm releases an optimistic forecast about the growth of the firm. The manager decides to raise $100M by issuing 80K convertible bonds at a price of $1,250 per bond. Each bond has a face value of $1,000, a coupon rate of 6 perc..

Compuite current and quick ratios based on projected balance : 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?

Temperature of the calorimeter : When .0430 mole of titanium is combusted in a bomb calorimeter, the temperature of the calorimeter increases from 30.00degress Celsius to 91.60 degrees Celsius. In a separate experiment, the heat capacity of the calorimeter is measured to be 9.84k..

Standard deviation of rate of return on investment : A project has a 0.48 chance of doubling your investment in a year and a 0.52 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment?

What would happen if a species of lizard were suddenly split : SCIE211: What would happen if a species of lizard were suddenly split into 2 groups by a hurricane resulting in the isolation of a small group of individuals on an island far from the mainland? Summarize the procedures that you used in the lab. The..

Koh solution for complete neutralization : A 0.6745 gram sample of KHP reacts with 41.75 mL of KOH solution for complete neutralization. What is the molarity of the KOH solution? (Molecular weight of KHP = 204 g/mol. KHP has one acidic hydrogen.)

User Account

All Pages