Problem: Use the financial statements below to perform the following:
| |
2000 |
2001 |
2002 |
2003 |
2004 |
| Cash & equivalents |
?75.00 |
?75.00 |
?90.00 |
?100.00 |
?100.00 |
| Accounts receivable |
?300.00 |
?400.00 |
?600.00 |
?550.00 |
?500.00 |
| Inventory |
?150.00 |
?250.00 |
?350.00 |
?250.00 |
?250.00 |
| Gross fixed assets |
?700.00 |
?800.00 |
?900.00 |
?900.00 |
?900.00 |
| (Accumulated depr.) |
(?75.00) |
(?125.00) |
(?190.00) |
(?260.00) |
(?335.00) |
| Total assets |
?1,150.00 |
?1,400.00 |
?1,750.00 |
?1,540.00 |
?1,415.00 |
|
|
|
|
|
|
| Accounts payable |
?125.00 |
?175.00 |
?250.00 |
?225.00 |
?200.00 |
| Notes payable |
?165.00 |
?162.00 |
?178.00 |
?136.00 |
?99.00 |
| Accrued operating exp. |
?10.00 |
?63.00 |
?65.00 |
?49.00 |
?36.00 |
| Current maturities |
?50.00 |
?98.00 |
?100.00 |
?40.00 |
?40.00 |
| Long-term debt |
?600.00 |
?500.00 |
?400.00 |
?200.00 |
?150.00 |
| Shareholders' equity |
?200.00 |
?402.00 |
?757.00 |
?890.00 |
?890.00 |
|
|
|
|
|
|
|
|
|
|
|
|
| Revenues |
?1,500.00 |
?2,250.00 |
?3,000.00 |
?2,000.00 |
?1,500.00 |
| Cost of goods sold |
?600.00 |
?900.00 |
?1,200.00 |
?800.00 |
?600.00 |
| Operating expenses |
?600.00 |
?700.00 |
?800.00 |
?750.00 |
?725.00 |
| Depreciation |
?35.00 |
?50.00 |
?65.00 |
?70.00 |
?75.00 |
| Interest |
?30.00 |
?33.00 |
?28.00 |
?25.00 |
?10.00 |
| Taxes |
?94.00 |
?285.00 |
?420.00 |
?142.00 |
?36.00 |
| Net profit |
?141.00 |
?282.00 |
?487.00 |
?213.00 |
?54.00 |
| Dividends |
?40.00 |
?80.00 |
?132.00 |
?80.00 |
?54.00 |
Q1. Calculate the solvency ratios, current ratio, qucik ratio, net working capital, and working capital requirements for each of the five years. Discuss and interpret the trends you see.
Q2. Calculate the cash flow from operations for 2001 through 2004 and the cash conversion efficiency and interpret the 4-year trend.
Q3. Calculate the cash conversion period for each of the five years and interpret the trend.
Q4. Assuming cash flow from operations to be the following, calculate the current liquidity index and interpret the 4-year trend.
2001 $250
2002 $400
2003 $350
2004 $130
Q5. Compare and contrast your interpretation of the current ratio trend with your interpretation of the current liquidity index.
Q6. What is your opinion of the firm's liquidity position and why?
Use the financial statements in attachment to perform the following:
a. Calculate the solvency ratios, current ratio, qucik ratio, net working capital, and working capital requirements for each of the five years. Discuss and interpret the trends you see.
b. Calculate the cash flow from operations for 2001 through 2004 and the cash conversion efficiency and interpret the 4-year trend.
c. Calculate the cash conversion period for each of the five years and interpret the trend.
d. Assuming cash flow from operations to be the following, calculate the current liquidity index and interpret the 4-year trend.
2001 $250
2002 $400
2003 $350
2004 $130
e. Compare and contrast your interpretation of the current ratio trend with your interpretation of the current liquidity index.
f. What is your opinion of the firm's liquidity position and why?