1. Complete the 1992 columns of Tables 3 through 6, disregarding for now the projected data in the 1993 and 1994 columns. If you are using the Lotus model, use it to complete the tables. Be sure you understand all the numbers, as it would be most embarrassing (and harmful to your career) if you were asked how you got a particular number, and you could not give a meaningful response.

Table 1 Proforma 1993 1994 1990 1991 1992 Assets: Cash and Marketable Securities Accounts Receivable Inventory Current Assets Land, buildings, plants, and equipm Accumulated Depreciation Net Fixed Assets Total Assets 9,930 7,363 6,550 B 34,196 36,924 58,714 C D 39,791 69,361 97,984 E F 83,888 113,647 163,249 . 34,634 39,190 44,604 57,036 58,746 -5,992 -9,308 -13,388 -18,234 -21,880 28,642 29,887 31,216 38,802 36,866 112,530 143,534 194,465 215,375 1 Liabilities and Equity: Short-Term Bank Loans Accounts Payable Accruals Current Liabilities Long-Term Bank Loans Mortgage Long-Term Debt Total Liabilities Common Stock Retained Earnings Total Equity Total Liabilities and Equity 6,376 10,200 36,466 13,528 21,012 39,996 6,886 10,200 14,662 26,790 41,412 91,124 13,388 20,082 20,082 5,738 5,202 4,680 19,126 25,284 24,762 45,916 66,696 115,886 46,538 46,538 46,538 20,076 30,300 32,041 66,614 76,838 78,579 112,530 143,534 194,465 J 31,990 18,602 L 20,082 4,208 24,290 N 46,538 P R T K 33,590 23,252 M 20,082 3,788 23,870 0 46,538 Q S U Notes: a. 7,000,000 shares of common stock were outstanding throughout the period 1990 through 1992. b. Market price of shares: 1990-$17.78; 1991-89.70; 1992-93.74. c. Pricelearnings (P/E) ratios: 19906.29; 1991-4.98; 1992-11.28. The 1992 P/E ratio is high because of the depressed earnings that year d. Assume that all changes in interest-bearing loans and gross fixed assets occur at the start of the relevant years. c. The mortgage loan is secured by a first-mortgage bond on land and buildings Net Sales Cost of Goods Sold Gross Profit Admin and Selling Expenses Depreciation Misc Expenses Total Operating Expenses EBIT Interest on Short-Term Loans Interest on Long-Term Loans Interest on Mortgage Total Interest Before-Tax Earnings Taxes Net Income Dividends on Stock Additions to Retained Earnings Table 2 Proforma 1990 1991 1992 1993 1994 350,546 378,549 401,251 441,376 507,583 282,252 311,110 342,016 364,135 A 68,294 67,439 59,235 77,241 101,517 25,580 30,690 33,762 B C 3,188 3,316 4,080 4,846 3,646 4,054 7,114 11,450 D 6,345 32,822 41,120 49,292 E F 35,472 26,319 9,943 29,361 G 638 1,122 3,647 5,906 5,906 1,339 2,008 2,008 1,912 1,912 516 468 421 379 341 2,493 3,598 6,076 8,197 8,159 32,979 22,721 3,867 H 45,298 13,192 9,088 1,547 1 18,119 19,787 13,632 2,320 J K 4,947 3,408 580 0 L 14,841 10,224 1,740 M N Notes: a. Earnings per share (EPS): 1990-$2,69; 1991-$1.81; 1992-80.22. b. Interest rates on borrowed funds: Short-term loan: 1990-10%; 1991-11%; 1992-10% Long-term loan: 10% for cach year. Mortgage: 9% for each year c. For purposes of this case, assume that expenses other than depreciation and interest are totally variable with sales. Table 3 1990 1991 1992 8.82% 30.39 35.36 Assets: Cash and Marketable Securities Accounts Receivable Inventory Current Assets Land, Buildings, Plant, and Equipment Accumulated Depreciation Net Fixed Assets Total Assets 74.55 5.13% 25.72 48.32 79.18 27.31 (6.48) 20.82% 100 3.37% 30.39% 50.39 74.55% 30.78% (6.88) 16.05% 30.78 (5.32) 25.45% 100 100 Liabilities and Equities: Short-term Bank Loans Accounts Payable Acrruals Current Liabilities Long-term Bank Loans Mortgage Long-Term Debt Total Liabilities Common Sotck Retained Earnings Total Equity Total Liabilities and Equity 5.67% 7.11% 18.75% 12.02 14.64 20.57 6.12 7.11 7.54 23.81% 28.85% 46.86% 11.90% 13.99% 11.90% 5.10 3.62 2.41 17.00% 17.62% 40.80% 46.47% 59.59% 41.36% 32.42% 23.93% 17.84 21.11 17.84% 59.20% 53.53% 40.41% 100.00% 100.00% 100.00% Table 4 1990 1991 1992 Net Sales 100.00% 100.00% 100.00% Cost of Goods Sold 80.52 82.18 80.52% Gross Profit 19.48% 17.82% 14.76% Admin and Selling Expenses 7.30% 8.11% 8.41% Depreciation 0.91 0.88 0.01 Misc Expenses 1.16 1.88 2.85 Total Operating Expenses 9.36% 10.86% 2.28% EBIT 10.12% 6.95% 2.48% Interest on Short-Term Loans 0.18% 0.30% 0.009 Interest on Long-Term Loans 0.38% 0.53% 0.005 Interest on Mortgage 0.15 0.12 0.1 Total Interest 0.71% 0.95% 1.51% Before-Tax Earnings 9.41% 6.00% 0.96% Taxes 3.76 2.4 0.004 Net Income 5.64% 3.60% 0.58% Dividends on Stock 1.41% 0.90% 0.14% Additions to Retained Earnings 4.23% 2.70% 0.43% Table 5 1991 1992 Cash Flow from Operations Sales Increase in Receivables Cash Sales Cost of Goods Sold Increase in Inventories Increase in Accts Payable Increase in Accruals Cash Cost of Goods Cash Margin Admin and Selling Expense Misc Expense Taxes Net Cash Flow from Operations 378,549.00 401,205.00 (2,728.00) 21,970.00 375,821.00 379,461.00 (311,110.00) (342,016.00) (29,570.00) (28,623.00) 7,484.00 18,984.00 3,314.00 4,462.00 (329,882.00) (347,193.00) 45,939.00 32,268.00 (30,690.00) (33,762.00) (7,114.00) (11,450.00) (9,088.00) (1,547.00) (953.00) (14,491.00) Cash Flow from Fixed Asset Investment Investment in Fixed Assets (4,561.00) (5,409.00) Cash Flow from Financing Activities Increase in Short-Term Debt Increase in Long-Term Debt Repayment of Mortgage Interest Expense Common Dividends 3,824.00 6,694.00 (536.00) (3,598.00) (3,408.00) 26,266.00 0.00 (522.00) (6,076.00) (580.00) Net Cash Flow from Financing Activities Increase (Decrease) in Cash & Marketable Securities 2,976.00 19,088.00 (2,539.00) (812.00) Table 6 1990 Pro Forma 1993 1994 Industry Average 1991 1992 Liquidity Ratio: Current Ratio Quick Ratio 3.13 1.65 2.74 1.07 A 0.72 B 1.13 c. D 2.5 1 Leverage Ratio: Debt Ratio TIE Coverage 40.802 46.47% 14.23 7.31 E 1.64 F G 52.317 6.55 50.00% 7.7 Asset Management Ratios: Inventory Turnover (sale) 7.09 Inventory Turnover (sale) 8.81 Fixed Asset Turnover 12.24 Total Asset Turnover 3.12 Days Sale Outstanding (ACH 35.12 4.49 5.46 12.67 2.64 35.11 3.49 4.1 12.85 J 52.68 5.7 H 11.38 2.05 L 5.7 I 13.77 K 32 5.7 7 12 3 32 Profitability Ratio: Profit Margin Gross Profit Margin Return on Total Assets ROE 5.64% 3.60% 19.48% 17.82% 17.58% 9.50% 29.70% 17.74% 0.58% M N 14.767 17.50% 20.00% 5.90% 10.94% 2.95% P Q 2.90% 18.00% 8.80% 17.50% Other Ratio: Altman Z Scored Payout Ratio 6.64% 4.75% R 25.00% 25.00% 25.00% 3.95 0.00% 5.42 S 4.65% 20.00% a. Uses cost of goods sold as the numerator b. Unes net sales as the numerator. e. Assume a 360-day year. d. Alma's function is calculated as 2 -0.0128, +0.014X+0.033X, +0.006X, +0.999%, X - networking capital talsets X retained earning Motala X-market value of common and preferred stock book value of all debit The Altman Zscore range of 1.81-2.99 represents the so-called one of ignorance." Note that the first four are expressed as percentages. Refer to Chapter 26 of Eugene F. Brigham and Louis C. Gapenski. Intermediate inancial Management. Pourth Edition (Fort Worth Dryden Press, 1993), for details c. Year-end balance sheet values were used throughout in the computation of raties embodying balance sheet items. I. Assume constant industry-average ratios throughout the period 1990 through 1994