FIN 534 – Homework Set #1
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. Submit your assignment using the
assignment link in the course shell. This homework assignment is worth 100 points.
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
$7,282
$14,000
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
$1,124,000
$1,946,802
$2,680,112
Gross fixed assets
491,000
1,202,950
1,220,000
Less: Accumulated depreciation
146,200
263,160
383,160
$344,800
$939,790
$836,840
$1,468,800
$2,886,592
$3,516,952
$145,600
$324,000
$359,800
Notes payable
200,000
720,000
300,000
Accruals
136,000
284,960
380,000
$481,600
$1,328,960
$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
$663,768
$557,632
$1,977,152
$1,468,800
$2,886,592
$3,516,952
Total current assets
Net fixed assets
Total assets
Liabilities and Equity
Accounts payable
Total current liabilities
Total equity
Total liabilities and equity
© 2015 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information
and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of
Strayer University.
FIN 534 Homework Set #1 1156 (5-19-2015)
Page 1 of 3
FIN 534 – Homework Set #1
Income Statements
Sales
2012
2013
2014
$3,432,000
$5,834,400
$7,035,600
2,864,000
4,980,000
5,800,000
18,900
116,960
120,000
340,000
720,000
612,960
$3,222,900
$5,816,960
$6,532,960
$209,100
$17,440
$502,640
62,500
176,000
80,000
$146,600
($158,560)
$422,640
58,640
-63,424
169,056
Net income
$87,960
($95,136)
$253,584
Other Data
2012
2013
2014
Cost of goods sold except depr.
Depreciation and amortization
Other expenses
Total operating costs
EBIT
Interest expense
EBT
Taxes (40%)
Stock price
$8.50
$6.00
$12.17
100,000
100,000
250,000
EPS
$0.88
($0.95)
$1.104
DPS
$0.22
0.11
0.22
40%
40%
40%
$6.64
$5.58
$7.909
$40,000
$40,000
$40,000
Shares outstanding
Tax rate
Book value per share
Lease payments
© 2015 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information
and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of
Strayer University.
FIN 534 Homework Set #1 1156 (5-19-2015)
Page 2 of 3
FIN 534 – Homework Set #1
Ratio Analysis
2012
Industry
Average
2013
Current
2.3
1.5
2.7
Quick
0.8
0.5
1.0
4
4
6.1
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
2.60%
−1.6%
3.6%
14.20%
0.60%
17.8%
ROA
6.00%
−3.3%
9.0%
ROE
13.30%
−17.1%
17.9%
9.7
−6.3
16.2
8
27.5
7.6
1.3
1.1
2.9
Inventory turnover
Days sales outstanding
Profit margin
Basic earning power
Price/Earnings (P/E)
Price/Cash flow
Market/Book
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?
© 2015 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information
and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of
Strayer University.
FIN 534 Homework Set #1 1156 (5-19-2015)
Page 3 of 3
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