Financial Statement Analysis MG 770 Final Exam – Fall 2014 Part 2 – Problem Solving
Financial Statement Analysis MG 770 Final Exam – Fall 2014 Part 2 - Problem Solving – All Answers to be submitted on Excel Answer Sheet (show work or use formulas when appropriate) Use the following information about XYZ Plumbing (FY=12/31), a public company with the most recent closing stock price of $5.00, to answer the following three problems - ------------------------------------------------------------------------------------------------------ Income Statement 2012 2013 Revenue $ 10,000,000 $ 12,000,000 CGS 4,000,000 4,800,000 Gross Profit $ 6,000,000 $ 7,200,000 SG&A 1,800,000 2,000,000 R&D 1,000,000 1,000,000 Deprec & Amort 500,000 550,000 Total Op. Expense 3,300,000 3,550,000 Operating Profit $ 2,700,000 $ 3,650,000 Interest cost 520,000 600,000 Interest income 90,000 110,000 Pre-Tax $ 2,270,000 $ 3,160,000 Tax (35% rate) 794,500 1,106,000 Net Income $ 1,475,500 $ 2,054,000 EPS - Basic $ 0.15 $ 0.21 Average Shares Outstanding 10,000,000 10,000,000 Balance Sheet 2012 2013 2013 2013 ASSETS LIABILITIES Cash 3,000,000 4,154,000 Accounts Payable 500,000 500,000 A/R 1,000,000 1,500,000 Notes Payable 1,500,000 1,000,000 Inventory 2,000,000 2,300,000 Current portion of LTD 1,000,000 1,000,000 Pre-paid expenses 500,000 670,000 Accrued Liabilities 500,000 520,000 Total Current Assets 6,500,000 8,624,000 Total Current Liabilities 3,500,000 3,020,000 Building and Improvements 15,000,000 15,000,000 Long-Term Debt 12,000,000 14,000,000 Equipment 5,000,000 7,000,000 20,000,000 22,000,000 Stockholder's Equity Common Stock at Par 100,000 100,000 Depreciation 500,000 1,050,000 Paid in Capital 9,900,000 9,900,000 Net PP&E 19,500,000 20,950,000 Retained Earnings 500,000 2,554,000 Total Stockholder's Equity 10,500,000 12,554,000 Total Assets 26,000,000 29,574,000 Total Liabilities + Equity 26,000,000 29,574,000 Financial Statements - Final Exam Fall 2014 - 1 - 1. (26 Points) Complete the following cash Flow Statement for XYZ Plumbing for 2013 Statement of Cash Flows 2013 Net Income Adjustments Depreciation and amortization Cash Provided by Operating Assets and Liabilities Accounts Receivable Inventories Pre-paid expenses Accounts payable Accrued liabilities Net Cash provided (used) by operating activities Cash Provided from Investing Activities Additions to property, plant and equipment Net Cash provided (used) by investing activities Cash Provided from Financing Activities Additions to long term borrowing Addition to short term borrowing Net Cash provided (used) by financing activities Net Cash Flow 2. ( 6 Points) Calculate the following ratios for 2013: 2013 Current Ratio Accounts Receivable turnover Inventory turnover Revenue to Cash Return on Assets Return on Equity Financial Statements - Final Exam Fall 2014 - 2 - 3. (18 Points,1 point for each correct box except diluted shares - 6 points) 3.) Fill in the projections for XYZ for 2003, based on the following assumptions: 1. Revenue grows by 20% between 2013 and 2014. 2. Gross Margins remain at 2013 levels. 3. SG&A improves by 1% (as a % of revenue) 4. R&D increases by 20%. 5. Depreciation and Amortization costs do not change between 2013 and 2014. 6. Interest costs and expenses are given in the table. 7. The tax rate remains constant. 8. Options and Warrants are listed in the following table: Options Amount Exercise Price Public Warrants Amount Exercise Price Officers and Directors 2,000,000 $2.00 Shareholders 4,000,000 $3.00 2014E Revenue CGS Gross Profit SG&A R&D Deprec & Amort Total Op. Expense Operating Profit Interest cost Interest income Pre-Tax Tax (35% rate) Net Income EPS - Basic EPS - Diluted Financial Statements - Final Exam Fall 2014 - 3 -