Fin Man Project

FIN 534 â€“ Homework Set #1

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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:

1. What is the free cash flow for 2014?

2. Suppose Congress changed the tax laws so that Berndtâ€™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 companyâ€™s liquidity position in 2013?

4. Use the extended DuPont equation to provide a summary and overview of companyâ€™s financial condition as projected for 2014. What are the firmâ€™s major strengths and weaknesses?

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 firmâ€™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
Total current assets	$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
Net fixed assets	$344,800	$939,790	$836,840
Total assets	$1,468,800	$2,886,592	$3,516,952
Liabilities and Equity
Accounts payable	$145,600	$324,000	$359,800
Notes payable	200,000	720,000	300,000
Accruals	136,000	284,960	380,000
Total current liabilities	$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
Total equity	$663,768	$557,632	$1,977,152
Total liabilities and equity	$1,468,800	$2,886,592	$3,516,952

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