Strayer FIN 534 Homework Set #1

Directions: 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 firms clients. Your boss has developed the following set ofquestions you must answer.Income Statements and Balance SheetBalance Sheet201220132014Cash$9,000$7,282$14,000Short-term investments48,60020,00071,632Accounts receivable351,200632,160878,000Inventories715,2001,287,3601,716,480$1,124,000$1,946,802$2,680,112Gross fixed assets491,0001,202,9501,220,000Less: Accumulated depreciation146,200263,160383,160$344,800$939,790$836,840$1,468,800$2,886,592$3,516,952$145,600$324,000$359,800Notes payable200,000720,000300,000Accruals136,000284,960380,000$481,600$1,328,960$1,039,800Long-term debt323,4321,000,000500,000Common stock (100,000shares)460,000460,0001,680,936Retained earnings203,76897,632296,216$663,768$557,632$1,977,152$1,468,800$2,886,592$3,516,952Total current assetsNet fixed assetsTotal assetsLiabilities and EquityAccounts payableTotal current liabilitiesTotal equityTotal liabilities and equity2014 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 #1Page 1 of 4FIN 534 Homework Set #1Income StatementsSales201220132014$3,432,000$5,834,400$7,035,6002,864,0004,980,0005,800,00018,900116,960120,000340,000720,000612,960$3,222,900$5,816,960$6,532,960$209,100$17,440$502,64062,500176,00080,000$146,600($158,560)$422,64058,640-63,424169,056Net income$87,960($95,136)$253,584Other Data201220132014Cost of goods sold except depr.Depreciation and amortizationOther expensesTotal operating costsEBITInterest expenseEBTTaxes (40%)Stock price$8.50$6.00$12.17100,000100,000250,000EPS$0.88($0.95)$1.104DPS$0.220.110.2240%40%40%$6.64$5.58$7.909$40,000$40,000$40,000Shares outstandingTax rateBook value per shareLease payments2014 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 #1Page 2 of 4FIN 534 Homework Set #1Ratio Analysis2012IndustryAverage2013Current2.31.52.7Quick0.80.51.0446.137.339.632.0Fixed assets turnover106.27.0Total assets turnover2.322.5Debt ratio35.60%59.60%32.0%Liabilities-to-assets ratio54.80%80.70%50.0%TIE3.30.16.2EBITDA coverage2.60.88.02.60%1.6%3.6%14.20%0.60%17.8%ROA6.00%3.3%9.0%ROE13.30%17.1%17.9%9.76.316.2827.57.61.31.12.9Inventory turnoverDays sales outstandingProfit marginBasic earning powerPrice/Earnings (P/E)Price/Cash flowMarket/Book1. What is the free cash flow for 2014?2. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. Nochanges 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 incomestatement data. What can you say about the companys liquidity position in 2013?4. Calculate the 2014 inventory turnover, days sales outstanding (DSO), fixed assets turnover, andtotal assets turnover.5. Calculate the 2014 debt ratio, liabilities-to-assets ratio, times-interest-earned, and EBITDAcoverage ratios. What can you conclude from these ratios?6. Calculate the 2014 profit margin, basic earning power (BEP), return on assets (ROA), and returnon equity (ROE). What can you say about these ratios?7. Calculate the 2014 price / earnings ratio, price / cash flow ratio, and market / book ratio.