1) Use the following data for a firm 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 Accumulated Depreciation (335) (260) (190) (125) (75) Total Assets s 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 Jinterest 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 NWCCA-CL NWC = WCR + NLB NLB = Financial CA - Financial CL WCR = Operating CA - Operating CL 2019 2018 2017 2016 2015 2.27 1.75 1.46 1.50 Current Ratio 1.60 1.16 0.95 1.07 Quick Ratio S 475 IS 447 S 227 227 $ 175 NWC S (39) S (188) $ (185) (140) NLB $ 314 IS 635 $ 412 $ 315 WCR 0.34 0.21 0.18 0.21 WCRS Interpret the results: B. Calculate Operating Cash Flows for 2018. 2019 2018 2017 2016 2015 Cash Flow Account Cash Flow Statement Adjustment BAN Net Income 54 487 Income Statement Sales 282 - Cash Collected +Depreciation 75 65 ES 50 OGS - Cash Paid to Suppliers - Change in AR -50 200 100 AP + in - Op Acer - Change in In D 100 100 Operating per Cath Paid for Opp A De 24 75 SO inte ACE Cash Paid to Creditors + Change in AP +Change in Accruals NET CFFO -13 2 53 Accrued as Detened as |- Cash Paid for Tas 142 329 235 Net Profit Operating Cash Flow 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 E Operating Cycle 273.75 179.46 166.28 CCC 152.08 103.42 95.31 Interpret the trend
