How did mydecos inventory days change over the period

Reference no: EM131426268

Assignment Questions

1. What are the main advantages and disadvantages of organizing a firm as a corporation?

2. In recent years, top managers have been given large packages of options, giving them the right to buy stock in the firm at a fixed price. Will these compensation schemes make managers more responsive to stockholders? Why, or why not? Are lenders to the firm affected by these compensation schemes?

3. Classify each of the following items as an inflow (I) or an outflow (O) of cash or as neither (N). (Tip: You can use class notes p.24-30 to help you identify which is cash inflow or cash outflow).

Item	Charge ($)	Item	Charge ($)
Cash	+600	Accounts receivable	-900
Accounts payable	-1,200	Net profits	+700
Notes payable	+800	Depreciation	+200
Long-term debt	-2,500	Repurchase of stock	+500
Inventory	+400	Cash dividends	+300
Fixed assets	+600	Sale of stock	+1,300

4. Assume current liabilities are $10,000, the current ratio is 2.0, and the quick ration is 1.0. How much does the firm have in inventory and other assets and how much does the firm have in current assets?

5. Using the financial statements and stock price information of Mydeco Corp in the next page to answer following questions:

a. How did Mydeco's accounts receivable days change over this period?
b. How did Mydeco's inventory days change over this period?
c. Based on your analysis, has Mydeco improved its management of its working capital during this time period?
d. Compare accounts payable days in 2012 and 2016.
e. Did this change in accounts payable days improve or worsen Mydeco's cash position in 2016?

2012-2016 Financial Statement Data and Stock Price Data for Mydeco Corp.
Mydeco Corp. 2012-2016	(All data as of fiscal year end; in $ million)
Income Statement	2012	2013	2014	2015	2016
Revenue	404.3	363.8	424.6	510.7	604.1
Cost of Goods Sold	(188.3)	(173.8)	(206.2)	(246.8)	(293.4)
Gross Profit	216.0	190.0	218.4	263.9	310.7
Saks and Marketing	(66.7)	(66.4)	(82.8)	(102.1)	(120.8)
Administration	(60.6)	(59.1)	(59.4)	(66.4)	(78.5)
Depreciation & Amortization	(27.3)	(27.0)	(34.3)	(38.4)	(38.6)
EBIT	61.4	37.5	41.9	57.0	72.8
Interest Income (Expense)	(33.7)	(32.9)	(32.2)	(37.4)	(39.4)
Pretax Income	27.7	4.6	9.7	19.6	33.4
Income Tax	(9.7)	(1.6)	(3.4)	(6.9)	(11.7)
Net Income	18.0	3.0	6.3	12.7	21.7
Sham outstanding (millions)	55.0	55.0	55.0	55.0	55.0
Earnings per share	$0.33	$0.05	$0.11	$0.23	$0.39
Balance Sheet	2012	2013	2014	2015	2016
Assets
Cash	48.8	68.9	86.3	77.5	85.0
Accounts Receivable	88.6	69.8	69.8	76.9	86.1
Inventory	33.7	30.9	28.4	31.7	35.3
Total Current Assets	171.1	169.6	184.5	186.1	206.4
Net Property, Plant & Equip.	245.3	243.3	309	345.6	347.0
Goodwill & Intangibles	361.7	361.7	361.7	361.7	361.7
Total Assets	778.1	774.6	855.2	893.4	915.1
Liabilities and Stockholders' Equity
Accounts Payable	18.7	17.9	22.0	26.8	31.7
Accrued Compensation	6.7	6.4	7.0	8.1	9.7
Total Current Liabilities	25.4	24.3	29.0	34.9	41.4
Long-term Debt	500.0	500.0	575.0	600.0	600.0
Total Liabilities	525.4	524.3	604.0	634.9	641.4
Stockholders' Equity	252.7	250.3	251.2	258.5	273.7
Total Liabilities	778.1	774.6	855.2	893.4	915.1
& Stockholder? Equity
Statement of Cash Flows	2012	2013	2014	2015	2016
Net Income	18.0	3.0	63	12.7	21.7
Depreciation & Amortization	27.3	27.0	343	38.4	38.6
Chg. in Accounts Receivable	3.9	18.8	(0.0)	(7.1)	(9.2)
Chg. in Inventory	(2.9)	2.8	2.5	(3.3)	(3.6)
Gig. in Payables & Accrued Comp.	2.2	(1.1)	4.7	5.9	6.5
Cash from Operations	48.5	50.5	47.8	46.6	54.0
Capital Expenditures	(25.0)	(25.0)	(100.0)	(75.0)	(40.0)
Cash from Investing Activities	(25.0)	(25.0)	(100.0)	(75.0)	(40.0)
Dividends Paid	(5.4)	(5.4)	(5.4)	(5.4)	(6.5)
Sale (or purchase) of stock	-	-	-	-	-
Debt Issuance (Pay Down)	-	-	75.0	25.0	-
Cash from Financing Activities	(5.4)	(5.4)	69.6	19.6	(6.5)
Change in Cash	18.1	20.1	17.4	(8.8)	7.5
Mydeco Stock Price	$7.92	$3.30	$5.25	$8.71	$10.89

Reference no: EM131426268

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