1) Use the following data for a fim to assess solvency: Balance Sheets 2019 2018 2017 2016 2015 Cash & Equivalents 100 100 90 75 75 Accounts Receivable 500 550 600 400 300 Inventory 250 250 350 250 150 Gross Fixed Assets 900 900 900 800 700 (335) (260) (190) (125) (75) Accumulated Depreciation Total Assets $ 1,415 $ 1,540 $ 1,750 $ 1,400 $ 1,150 Accounts Payable 200 224 250 175 125 Notes Payable 99 136 178 162 165 Accruals 36 49 65 63 10 Current Portion of LTD 40 40 100 98 50 LTD 150 200 400 500 600 Net Worth 890 891 757 402 200 Total Liab & Net Worth $ 1,415 $ 1,540 $ 1,750 $ 1,400 $ 1,150 Income Statements 2019 2018 2017 2016 2015 Sales 1,500 2,000 3,000 2,250 1,500 CGS 600 800 1,200 900 600 Operating Expenses 725 750 895 797 600 Depreciation 75 70 65 50 3 Interest 10 25 28 33 30 Taxes 36 142 325 188 94 Net Profit $ 54 $ 213 $ 487 $ 282 $ 173 Dividends paid $ 54 $ 80 $ 132 $ 80 $ 40 A Calculate the following ratios for 2018: Current Ratio=CA/CL Quick Ratio = (CA - Inventory)/CL NWC = CA-CL NWC = WCR + NLB NLB = Financial CA - Financial CL WCR = Operating CA - Operating CL . 2019 2018 2017 2016 2015 2.27 2 1.75 1.45 1.50 Current Ratio 1.60 1.45 1.16 0.95 1.07 Quick Ratio $ 475 451 $ 447 $ 2275 175 NWC $ (39) (76) $ (188) S (185) 5 (140) NLB $ 514 $ 527 635 $ 412S 315 WCR 0.34 0.21 0.18 0.21 WCRIS Interpret the results: B. Calculate Operating Cash Flows for 2018. 2018 2017 2015 2015 Cash Flow Statement 2019 54 rhamA Net Income 487 282 50 - Cash Code 75 AAP 065 - Cash 05 -50 200 100 Cachado 0 100 100 Depreciation - Change in AR - Change in Inv. Change in AP Change in Accruals NET CFFO -24 - Dashed 75 - 40 Acer -2. De AM Arts - Detered us 50 -13 21 Cashier 53 235 142 329 JetPro nperating anh Interpret the trend be sure to compare profits to cash flows. C. Calculate the Cash Conversion Cycle (use end-of-period amounts rather than average of receivables, inventory, and payables): . Days Sales Outstanding (DSO) = Receivables/ (Sales/365) Days Inventory Held (DIH) = Inventory / (CGS/365) Days Payable Outstanding (DPO) = Payables/ (CGS/365) Operating Cycle=DSO+DIH Cash Conversion Cycle (CCC) = Operating Cycle - DPO 2019 2018 2017 2016 2015 DIH 152.08) 106.46 101.29 DSO 121.67 73 64.89 DPO 121.67 76.04 70.97 Operating Cycle 273.75 179.46 166.28 CCC 152.08) 103.42 95.31 Interpret the trend CF PV = -COGS Revenues DailyNPV NPV NPV = [1+(3 : 0)] (DPO) 1+ (DIH+DSO) 365 365 365 2) Adopting New Credit Terms -A fimm believes it would experience an increase in NPV of $287.50 per day (note: this is the daily NPV) ifit adopts new credit terms. If the annual opportunity cost of capital (i) is 5%, calculate the perpetual (aggregate) increase in shareholder value (NPV) from adopting the new terms. Recalculate the total increase in shareholder value using a i of 8% Comment on the difference
