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Financial Statement Analysis

Autor:   •  April 26, 2016  •  Exam  •  4,564 Words (19 Pages)  •  571 Views

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MGT 3075, Sample Midterm #1

Answer ANY 4 of the 6 questions

The total points are 100

The exam counts for 20% of your final grade

Name:  ____________________________________

  1. Financial Statement Analysis

Using the financial statements provided below, calculate / answer the following for the year 2010.  You will not get points if you just wrote down the answer; please show clearly what the numerator and the denominator is, and then what that ratio equals to.

  1. Market to Book ratio [2.5 points]  = Market Value of Equity / Book Value of Equity = ($16 x 10.2m) / 126.6m = 1.29
  2. Enterprise Value [2.5 points]  = Market Value of Equity + Total Debt – Cash ($16 x 10.2m) + (239.7 + 10.5 + 39.9) – 63.6 = 389.7m
  3. Current Ratio [2.5 points]  = Current Assets / Current Liabilities = 171/144 = 1.1875
  4. Gross Margin [2.5 points] = Gross Profit / Sales = 109.9 / 610.1 = 0.18 or 18.01% 
  5. Calculate the AR-days in the two years, and then tell us whether the firm is managing its AR better than the previous year or worse? (Calculate both the numbers, and then make a statement.) [2.5 points]  AR-days = AR / Average Daily Sales = (AR x 365 / Total Sales).  AR-days for 2010 = (55.5 x 365) / 610.1 = 33.2 days.  AR-days for 2009 = (39.6 x 365) / 578.3 = 24.99 days.  This suggests that the firm is not managing its credit well, when comparing 2010 with 2009 as the number of days that they take to get payment from customers has gone up.  
  6. Calculate the Inventory-days in the two years, and then tell us whether the firm is managing its inventory better than the previous year or worse? (Calculate both the numbers, and then make a statement.) [2.5 points] Inventory days = Inventory / Average Daily COGS = (Inventory x 365 / COGS). Inventory days for 2010 = (45.9 x 365) / 500.2 = 33.49 days.  Inventory days for 2009 = (42.9 x 365) / 481.9 = 32.49 days.  This suggests that their inventory management has worsened slightly from 2009 to 2010. Or, given the small magnitude, one could also say that it hasn’t changed much at all.  

  1. ROE [2.5 points] = Net Income as a % of Book Equity = 10.6 / 126.6 = 8.37%.   
  2. ROA [2.5 points] = Net income as a % of Total Assets = 10.6 / 533.1 = 1.99%.  
  3. P/E ratio [2.5 points] = Price per Share / Earnings per Share = Market Value of Equity / Net Income = (16 x 10.2) / 10.6 = 15.40.  
  4. Interest Coverage Ratio (using the Net Income) [2.5 points] = Net Income / Interest Expense = 10.6 / 25.1 = 0.42 or 42.23%.  

Foogle Hoogle Company's (FHC's) Balance Sheet ($ millions):

Assets

2010

2009

Liabilities and Stockholders' Equity

2010

2009

Current Assets

Current Liabilities

Cash

63.6

58.5

Accounts Payable

87.6

73.5

Accounts Receivable

55.5

39.6

Short-term Debt

10.5

9.6

Inventory

45.9

42.9

Current Maturities of Long-term Debt

39.9

36.9

Other Current Assets

6.0

3.0

Other Current Liabilities

6.0

12.0

Total Current Assets

171.0

144.0

Total Current Liabilities

144.0

132.0

Long-term Assets

Long-term Liabilities

Land

66.6

62.1

Long-term Debt

239.7

168.9

Buildings

109.5

91.5

Capital Lease Obligations

0.0

0.0

Equipment

119.1

99.6

Total Debt

239.7

168.9

Less Accumulated Depreciation

-56.1

-52.5

Deferred Taxes

22.8

22.2

Net PPE

239.1

200.7

Other Long-term Liabilities

0.0

0.0

Goodwill

60.0

0.0

Total Long-term Liabilities

262.5

191.1

Other Long-term Assets

63.0

42.0

Tota Liabilities

406.5

323.1

Total Long-term Assets

362.1

242.7

Stockholders' Equity

126.6

63.6

TOTAL ASSETS

533.1

386.7

TOTAL LIABILITIES + EQUITY

533.1

386.7

Foogle Hoogle Company's (FHC's) Income Statement ($ millions):

2010

2009

Total Sales

610.1

578.3

COGS

-500.2

-481.9

Gross Profit

109.9

96.4

SG&A

-40.5

-39.0

R&D

-24.6

-22.8

Depreciation and Amortization

-3.6

-3.3

EBIT

41.2

31.3

Interest Expense

-25.1

-15.8

Taxes

-5.5

-5.3

Net Income

10.6

10.2

Dividends Paid

5.1

5.0

Price / share

$16.0

$15.0

Shares Outstanding (millions)

10.2

8.0

Stock Options Outstanding (millions)

0.3

0.2

  1. Time Value of Money
  1. What is the PV of the following cashflow stream if the discount rate is 10%?  (Please write out the formula that shows how you got the final answer; you won’t earn points otherwise.)  [5 points]

0                1                2                3                4                5[pic 1][pic 2][pic 3][pic 4][pic 5]

???                5,000.00        5,250.00        5,512.50        5,788.12        6,077.53

[pic 6]

The same answer can be found by using the formula for a growing annuity (as it seems to be growing at 5%):

...

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