Question;? 2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary informationand may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission ofStrayer University.FIN 534 Homework Set #1 Page 1 of 4Directions: Answer the following questions on a separate document. Explain how you reached the answeror show your work if a mathematical calculation is needed, or both. Submit your assignment using theassignment link in the course shell. This homework assignment is worth 100 points.Use the following information for Questions 1 through 8:Assume that you recently graduated and have just reported to work as an investment advisor at the oneof the firms on Wall Street. You have been presented and asked to review the following IncomeStatement and Balance Sheets of one of the firm?s clients. Your boss has developed the following set ofquestions you must answer.Income Statements and Balance SheetBalance Sheet 2012 2013Cash $9,000 $7,282Short-term investments 48,600 20,000Accounts receivable 351,200 632,160Inventories 715,200 1,287,360Total current assets $1,124,000 $1,946,802Gross fixed assets 491,000 1,202,950Less: Accumulated depreciation 146,200 263,160Net fixed assets $344,800 $939,790Total assets $1,468,800 $2,886,592Liabilities and EquityAccounts payable $145,600 $324,000Notes payable 200,000 720,000Accruals 136,000 284,960Total current liabilities $481,600 $1,328,960Long-term debt 323,432 1,000,000Common stock (100,000shares)460,000 460,000Retained earnings 203,768 97,632Total equity $663,768 $557,632Total liabilities and equity $1,468,800 $2,886,592Income Statements 2012 2013Sales $3,432,000 $5,834,400Cost of goods sold except depr. 2,864,000 4,980,000Depreciation and amortization 18,900 116,960Other expenses 340,000 720,000Total operating costs $3,222,900 $5,816,960EBIT $209,100 $17,440Interest expense 62,500 176,000EBT $146,600 ($158,560)Taxes (40%) 58,640 -63,424Net income $87,960 ($95,136)Other Data 2012 2013Stock price $8.50 $6.00Shares outstanding 100,000 100,000EPS $0.88 ($0.95)DPS $0.22 0.11Tax rate 40% 40%Book value per share $6.64 $5.58Lease payments $40,000 $40,000FIN 534 Homework Set #1 Page 3 of 4Ratio Analysis 2012 2013Current 2.3 1.5Quick 0.8 0.5Inventory turnover 4 4Days sales outstanding 37.3 39.6Fixed assets turnover 10 6.2Total assets turnover 2.3 2Debt ratio 35.60% 59.60%Liabilities-to-assets ratio 54.80% 80.70%TIE 3.3 0.1EBITDA coverage 2.6 0.8Profit margin 2.60%?1.6%Basic earning power 14.20% 0.60%ROA 6.00%?3.3%ROE 13.30%?17.1%Price/Earnings (P/E) 9.7?6.3Price/Cash flow 8 27.5Market/Book 1.3 1.11. What is the free cash flow for 2013?2. Suppose Congress changed the tax laws so that Berndt?s depreciation expenses doubled. Nochanges in operations occurred. What would happen to reported profit and to net cash flow?3. Calculate the 2013 current and quick ratios based on the projected balance sheet and incomestatement data. What can you say about the company?s liquidity position in 2013?4. Calculate the 2013 inventory turnover, days sales outstanding (DSO), fixed assets turnover, andtotal assets turnover.5. Calculate the 2013 debt ratio, liabilities-to-assets ratio, times-interest-earned, and EBITDAcoverage ratios. What can you conclude from these ratios?6. Calculate the 2013 profit margin, basic earning power (BEP), return on assets (ROA), and returnon equity (ROE). What can you say about these ratios?7. Calculate the 2013 price / earnings ratio, price / cash flow ratio, and market / book ratio.FIN 534 ? Homework Set #18. Use the extended DuPont equation to provide a summary and overview of company?s financialcondition as projected for 2013. What are the firm?s major strengths and weaknesses?
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