FINANCIAL ANALYSIS AND PLANNING Thib?s Co. RATIOS
	IA	2002	2003	2004 Pro Forma
Current	2	2.02	1.4	2.1
Quick	1	1.02	0.60	1.1
Inv TO	15	15.56	8.00	16
DSO	45	44.49	80.95	46
FIXED Asset TO	2.5	2.56	1.61	2.6
TOTAL Asset TO	1.4	1.32	.91	1.5
Debt Ratio	.52	0.57	0.62	.54
X Interest Earn	4.5	4.73	1.55	4.4
Profit Margin	5	% 6.5%	3.6%	5.1%
ROA	7%	8.7%	2.4%	9%
ROE	15%	20.1%	10.7%	22.1%
PE	12	16	5	15

1. Perform a ratio analysis on the Thib?s Co. above for 2003. Break down your analysis by ratio groups.

Thib?s is an oil service company (manufactures and repairs drill fishing tools) that has 50% of its operations in the Gulf of Mexico and 30% in Brazil and 20% is Saudi Arabia.

Thib?s has a good reputation for paying its bills on time and being a model corporate citizen. There was that little financial trouble in 2000 but that was mostly related to business in Brazil and Thib?s was still able to make its payments on time. In 2003, Thib?s again has a problem in Brazil and also a more serious problem in Saudi Arabia. Thib?s had to charge off several large accounts receivable and has a few customers that are paying very late.

For 2004 things look much brighter. The issues in Brazil and Saudi have been resolved. The company has put into place a good financial plan that will restore the company to similar performance as 2002.

For 2004 and for years into the future, the economy and business environment looks very favorable in the US and abroad with an anticipated considerable increase in exploration activity. The political climate is less certain. The industry may experience higher taxes and regulation. Also, there is a rumor that a large Chinese Company is going to build a plant in the region and enter the market.

The main office and plant are located in Grosse Tete. The office and plant are very modern and have a very positive appearance. Operations seem to be in good order.

2. Apply the 6 C?s of credit to a loan application for Thib?s for 2004.

List each of the 6 C?s of credit and discuss how you would analyze it. You do not have all the information available in this brief paragraph. In your discussion reference the information you would consider and its source. (For example, Cash Flow statements will help evaluate Capacity). Be specific but brief.

3. What are some non-quantitative factors that should be considered when performing financial analysis (apply to Thib?s above)?

4. Prepare a pro forma income statement and balance sheet for Boodro Inc. for 2004.

GIVEN Pro Forma Income Statement Info for 2004:

SALES = 25,520,000 Increase of 16% over 2003 (2003 Sales is _22,000,000)

Gross Profit margin 35%,

Other expenses 1,000,000

Depreciation 200,000

Interest 25,000,

Taxes 50%,

Dividend Payout Ratio 40%,

BB is at full capacity, so any increase in sales has to be accompanied by an increase in fixed assets.

Cash needed is $250,000.

For the Balance sheet, use the percentage of sales method. Make sure you increase Fixed Assets by 16%.

2004 Pro Forma IS

Boodro Inc.

Sales $25,500,000

CGS

Gross Profit

Other Expenses 1,000,000

EBDIT

Depreciation 200,000

EBIT

Interest 25,000

EBT

Taxes (50%)

Net Income

Dividends

TO RE_______________________

BB INC.

Balance Sheet

2003 % 2004

Cash 250,000 250,000

MS 250,000 0

A/R 4,000,000

Inv 5,000,000

Total Current Assets 9,500,000

Fixed Assets 10,850,000

Total Assets 20,350,000

Accounts Payable 2,000,000

Notes Payable 1,000,000 1,000,000

Accruals 2,000,000

Total Current Liabilities 5,000,000

Long-term Debt 7,000,000 7,000,000

Common Stock (par $2) 300,000 300,000

Retained Earnings 8,050,000

Total Liabilities & Equity 20,350,000

FINANCING REQUIRED?????????? $_________

Complete the Pro Forma BS for 2004 above to determine financing required.

5. Given the following information, how much of a line of credit is appropriate? (Beckie's Toy Manufacturer ? 2004 Cash Budget for SEPT ? NOV in $1,000,000s). One half of sales are for cash and the balance is collected the month following the sales. Seventy percent of the purchases are for cash and the balance is paid the month following the purchase.

Sales 200 240 290 300

Purchases 200 275 400 500

AUG SEPT OCT NOV

Cash Inflows x

Cash Sales 120

Collect AR 100

Other 20 20 500

Total 240

Cash Outflows

Cash Purchases 192.5

Pay AP 60

Other 40 40 40

Total 292.5

Net Cash Flow

Beg Bal. 30

End Bal.

Required (30)

Surp(Loan) ________ _____________________________________

Line of Credit of__________________

Explain how the financial manager would use this cash budget (3 uses of cash budget).

6. Given the following selective ratios for FTEL Corporation can you identify and potential problems?

RATIO FTEL INDUSTRY AVERAGE

Current 2.4 2.25

Quick .9 1.45

Inventory turnover 6.9 12.5

Debt to assets 53.2 44.5

Times interest earned 3 9

DSO 60 days 32 days

P/E 9 17

ROA 6 17

FINANCIAL ANALYSIS AND PLANNING Thib's Co. RATIOS Current Quick Inv TO DSO FIXED Asset TO TOTAL Asset TO Debt Ratio X Interest Earn Profit Margin ROA ROE PE IA 2002 2003 2 1 15 45 2.5 1.4 .52 4.5 5% 7% 15% 12 2.02 1.02 15.56 44.49 2.56 1.32 0.57 4.73 6.5% 8.7% 20.1% 16 1.4 0.60 8.00 80.95 1.61 .91 0.62 1.55 3.6% 2.4% 10.7% 5 2004 Pro Forma 2.1 1.1 16 46 2.6 1.5 .54 4.4 5.1% 9% 22.1% 15 1. Perform a ratio analysis on the Thib's Co. above for 2003. Break down your analysis by ratio groups. Thib's is an oil service company (manufactures and repairs drill fishing tools) that has 50% of its operations in the Gulf of Mexico and 30% in Brazil and 20% is Saudi Arabia. Thib's has a good reputation for paying its bills on time and being a model corporate citizen. There was that little financial trouble in 2000 but that was mostly related to business in Brazil and Thib's was still able to make its payments on time. In 2003, Thib's again has a problem in Brazil and also a more serious problem in Saudi Arabia. Thib's had to charge off several large accounts receivable and has a few customers that are paying very late. For 2004 things look much brighter. The issues in Brazil and Saudi have been resolved. The company has put into place a good financial plan that will restore the company to similar performance as 2002. For 2004 and for years into the future, the economy and business environment looks very favorable in the US and abroad with an anticipated considerable increase in exploration activity. The political climate is less certain. The industry may experience higher taxes and regulation. Also, there is a rumor that a large Chinese Company is going to build a plant in the region and enter the market. The main office and plant are located in Grosse Tete. The office and plant are very modern and have a very positive appearance. Operations seem to be in good order. 2. Apply the 6 C's of credit to a loan application for Thib's for 2004. List each of the 6 C's of credit and discuss how you would analyze it. You do not have all the information available in this brief paragraph. In your discussion reference the information you would consider and its source. (For example, Cash Flow statements will help evaluate Capacity). Be specific but brief. 3. What are some non-quantitative factors that should be considered when performing financial analysis (apply to Thib's above)? 4. Prepare a pro forma income statement and balance sheet for Boodro Inc. for 2004. GIVEN Pro Forma Income Statement Info for 2004: SALES = 25,520,000 Increase of 16% over 2003 (2003 Sales is _22,000,000) Gross Profit margin 35%, Other expenses 1,000,000 Depreciation 200,000 Interest 25,000, Taxes 50%, Dividend Payout Ratio 40%, BB is at full capacity, so any increase in sales has to be accompanied by an increase in fixed assets. Cash needed is $250,000. For the Balance sheet, use the percentage of sales method. Make sure you increase Fixed Assets by 16%. Sales CGS Gross Profit Other Expenses EBDIT Depreciation EBIT Interest EBT Taxes (50%) Net Income Dividends 2004 Pro Forma IS Boodro Inc. $25,500,000 1,000,000 200,000 25,000 TO RE_______________________ BB INC. Balance Sheet 2003 Cash MS A/R Inv Total Current Assets Fixed Assets Total Assets 250,000 250,000 4,000,000 5,000,000 9,500,000 10,850,000 20,350,000 Accounts Payable Notes Payable Accruals Total Current Liabilities 2,000,000 1,000,000 2,000,000 5,000,000 Long-term Debt Common Stock (par $2) Retained Earnings Total Liabilities & Equity 7,000,000 300,000 8,050,000 20,350,000 % 2004 250,000 0 1,000,000 7,000,000 300,000 FINANCING REQUIRED.............................. $_________ Complete the Pro Forma BS for 2004 above to determine financing required. 5. Given the following information, how much of a line of credit is appropriate? (Beckie's Toy Manufacturer - 2004 Cash Budget for SEPT - NOV in $1,000,000s). One half of sales are for cash and the balance is collected the month following the sales. Seventy percent of the purchases are for cash and the balance is paid the month following the purchase. Sales Purchases Cash Inflows Cash Sales Collect AR Other Total Cash Outflows Cash Purchases Pay AP Other 200 200 240 275 290 400 300 500 AUG x SEPT OCT NOV 20 500 40 40 120 100 20 240 192.5 60 40 Total Net Cash Flow Beg Bal. End Bal. Required Surp(Loan) ________ 292.5 30 (30) _____________________________________ Line of Credit of__________________ Explain how the financial manager would use this cash budget (3 uses of cash budget). 6. Given the following selective ratios for FTEL Corporation can you identify and potential problems? RATIO FTEL INDUSTRY AVERAGE Current 2.4 2.25 Quick .9 1.45 Inventory turnover 6.9 12.5 Debt to assets 53.2 44.5 Times interest earned 3 9 DSO 60 days 32 days P/E 9 17 ROA 6 17