What is the length of Oriel’s cash conversion cycle? How long does it take for Riley to go from spending cash to receiving it? Why? 7. What are the implications of Oriel’s cash flow for the financing needs of the firm. Pander Bread Co. 1. Use Excel to compile Indirect Statement of Cash Flows, Common-Size Income Statement and Financial Ratios for each year. 2. How do you assess the strength of Pander’s marketing? 3. What have been the key drivers for Pander’s cash flow from operations? 4. Is this company liquid? 5. Is this an asset intensive business? Why or why not? 6.
Is the leverage risk high? 7. What is the source of Pander’s profitability? Is it good? California Choppers Ignore exhibits 1, 2 and 5 in the case. Else the set of ratios and the definitions for those ratios that we have discussed in class. Any data needed for industry comparisons must be generated by you. 1. Do the standard set of analytics: common-size income statements, indirect statements of cash flows, and financial ratios for all years. 2. What was California Choppers condition in 2000? How has it changed over the six year period? 3. Have all of the company’s initiatives been successful? . How would you evaluate the human resource aspects of the company? Wigwagged Gumbo Cologne 1 . Although the case is titled Wigwagged, it is really about two other companies. Your analysis should be about Haven Beam. Confine your work to Haven Beam only?do not do Bauhaus or Wigwagged Gumbo Cologne itself. 2. Analyze intensively the balance sheet and income statements of Haven Beam. Start by computing cash flow statements, financial ratios (remember the proper format from the ratio teaching note), and common-size income statements (always use net sales) for all years.
Also use net sales when sales are called for in a ratio. Land should be included as part of NFG in any ratio calculation. Identify the strengths and weaknesses of the company. Do not do any calculations or analysis for Bauhaus. 3. There are a few unusual accounts. Due from stockholders is a loan by the business to stockholders (note that it is an asset). Earned surplus is the same thing as retained earnings. 4. Exhibit 2 is an aging for Wigwagged accounts receivable to Haven Beam and Bauhaus.
Since it reflects Waistband’s accounts receivable to Haven Beam and Bauhaus, it also reflects Happen Bum’s and Bauhaus’ accounts payable to Wigwagged. 5. Haven Bum’s income statement stops at net profit before tax. Treat that as net income in all Of your calculations. 6. How strong is the company’s balance sheet? How about its income statement? Why? 7. What action should be taken by the credit department of Wigwagged Gumbo cologne? 8. You are now ready to write your business analysis. Make sure you attach a copy of your cash flow statements to your report. Jones Electrical Distribution 1 .
Analyze Jones Electrical to identify its strengths and weaknesses. Calculate all relevant analysis tools for all years using a spreadsheet. 2. Ignore the 2007, first quarter data and exhibit 3. 3. Net worth is the same thing as the total equity of the company (common or capital stock, paid-in-capital in excess of par, and retained earnings). It is unlikely that the common stock or paid-in-capital in excess of par have changed over the period. 4. What is the current condition of the company? 5. Why has this profitable firm had to borrow so much? 6. As the banker, what decision would you make?
Change Dental Clinic 1. Do your normal full analysis of the firm for 2002-2005 2. The footnotes are very important for this case. Make sure you use the information in the footnotes when doing your pro-formal analysis and ratio ululations. 3. Construct a pro-formal income statement and balance sheet for fiscal year end January 2007. A. When you are provided assumptions, use those assumptions. Otherwise, look at the historical data for guidance. B. Amortization expense is the same as depreciation expense. C. This case involves the sale of the assets of the company, not the entire firm.
When someone purchases the assets of a firm they generally purchase tangible assets such as inventory and fixed assets. Cash, accounts receivables, etc. Stay with the seller. With respect to the right hand side of the balance sheet, bets stay with the seller and the equity goes away. The purchaser’s balance sheet will reflect the assets purchased, the debt used to purchase those assets and the equity that the new owner has invested. D. Assume the transaction occurs at the end of 2006. The pro-formal analysis for a year, through January 2007. E. The data file includes the balance sheet after the buyout.
Use this as the beginning balance sheet for the new company. F. The 2005 balance sheet amounts for gross fixed assets and accumulated depreciation go away at the time of purchase. They are replaced by the fixed sets market value at the time of purchase with no depreciation, as shown on page 3. G. Do not forget to include your depreciation expense in accumulated depreciation when doing your pro formal analysis. H. Inventory at the time of purchase will be shown on page 3. I. Goodwill on the 2005 balance sheet will be replaced by the amount shown on page 3. J.
The equity on the 2005 balance sheet will go away and will be replaced by the amount Miller is investing in the firm. After that date it will be increased by retained earnings. K. As mentioned earlier, other balance sheet accounts (cash, counts receivable, prepaid expenses, and accounts payable) go away at the time of the transaction and Will be replaced by new amounts at the end of your pro-formal year. 4. Is the proposed loan structure appropriate? Can miller service the debt and pay off the principal according to schedule with his business plan? More Vine LTD. . Analyze More Vine to identify its strengths and weaknesses. 2. There are two bank loans. The bank line Of credit is the same thing as a permanent working capital loan, while the “bank loan” is a term loan. 3. There may be a few ratios that are not meaningful because the nature of mom of the numbers. 4. You are now ready to do your business analysis. Attach a copy of your pro- formal statements as well as the statement of academic honesty to your business analysis. Be Our Guest 1 . This case has both quarterly and annual data. You must analyze all time periods. . Make use of the reading on myrmidons, “Annulling Financial Ratios” 3. What are the key success factors in the equipment rental business? 4. How has the firm performed in the past few years? 5. As the bank loan officer, Anne Granger, how would you view this firm? What concerns might you have about the business and the lending legislations? What factors provide a source of comfort when considering the credit risk? 6. How much total bank financing will the firm need over the coming year (include both short-term and long-term borrowing)?
To answer this question you will have to construct quarterly income statements and balance sheets for the coming year. The approach to quarterly statements is virtually the same as it was for annual statements. For each quarter you must make assumptions for each pro-formal item. The reading on myrmidons, “Seasonal Sales Projections,” will show you how to estimate quarterly sales. You must use this procedure. Do not estimate quarterly sales using quarterly sales growth rates. When you are finished, you will have four columns of pro- formal data (one for each quarter of the year).
The assumptions for each quarter will generally be different. For example, first quarter CAP will be different from the second quarter CAP. 7. The prime rate at the time of the case was 8. 5% 8. What should AY Lavabo and Simons Williamson ask for when talking to the bank? Fifth firm needs additional bank financing, what loan structure or mix of loans best meets their needs? Do the covenants appear appropriate? 9. The negative cash accounts mean that they over drafted their bank account in 1994 and 1997. This is equivalent to the firm borrowing money (e. . , a 000) cash account means there is zero cash and the line of credit is actually $1 000 greater). You should use a small positive minimum cash balance for your quarterly pro-formats. 10. Distributions to shareholders are the same thing as dividends. Comfort Zone 1 . There is a huge amount of data and all data are available in the data file. Set up the ratios and cash flow statements for a quarter, and then “copy’ the ormolus to the other time periods. 2. Be careful with the ratio calculations using quarterly data.
Make sure you follow the reading “Annulling Financial Ratios”. 3. Gross accounts receivable and the allowance for bad debts are both shown on the quarterly balance sheets. Normally these two items are netted and that net amount appears on the balance sheet. For all of our previous cases this semester, when we looked at accounts receivable we were looking at the netted number. Therefore, make sure that when you calculate the average collection period you are using a netted number. . You should have complete sets of both quarterly and annual ratios and cash flow statements.
Note that the quarterly income statements in the case are cumulative within each year. You will need to look at each quarter, not the cumulative amounts, for all of your calculations (e. G. , you want the third quarter information, not the nine month period ending at the end of the third quarter). You can construct the quarterly income statements for a given year by using: a. The three month statement (1st quarter) b. Subtracting the three month statement from the six month statement (2nd ratter) c. Subtracting the six month statement from the nine month statement (3rd quarter) d. ND subtracting the nine month statement from the twelve month statement (4th quarter). 5. No adjustments are needed for the quarterly balance sheets since they are “snapshots” of the firm and not flows. 6. A stock dividend is not the same as a cash dividend. With a stock dividend, the firm gives each shareholder additional shares of stock in the firm. For example, if a firm paid a 10% stock dividend and you owned 100 shares of the stock, you would have 110 shares after the dividend. There is no ash flow involved and no effect on the total equity of the firm.