Financial Analysis Project ABC Company			2015	2016	2017
Balance Sheet
Assets
Cash			807,000	628,000	612,000
Accounts Receivable			2,682,000	2,896,000	4,605,000
Inventories			2,970,000	5,181,000	7,319,000
Total Current Assets			6,459,000	8,705,000	12,536,000
Net Fixed Assets			2,316,000	2,423,000	2,538,000
Total Assets			8,775,000	11,128,000	15,074,000
Liabilities and Equity
Accounts Payable			1,061,000	1,648,000	3.137,000
Notes Payable			500,000	800,000	2,860,000
Accruals			540,000	800,000	1,150,000
Total Current Liabilities			2,101,000	3,248,000	7,147,000
Long Term Debt			1,450,000	1,908,000	1,867,000
Common Stock			3,650,000	3,650,000	3,650,000
Retained Earnings			1,574,000	2,322,000	2,410,000
Total Equity			5,224,000	5,972,000	6,060,000
Total Liabilities & Equity			8,775,000	11,128,000	15,074,000
Income Statement
Sales			26,820,000	28,966,000	30,703,000
Cost of Sales			21,216,000	23,550,000	26,140,000
Gross Profit			5,604,000	5,416,000	4,563,000
Operating Expenses			2,574,000	3,225,000	3,866,000
Operating Profit			3,030,000	2,191,000	697,000
Interest			91,000	275,000	469,000
Earnings before Taxes			2,939,000	1,916,000	228,000
Taxes (48%)			1,411,000	919,000	110,000
Net Income			1,528,000	997,000	118,000

		2015	2016	2017	Industry Average
Liquidity
Current Ratio					2.5 x
Quick Ratio					1.0 x
Asset Management
Average Collection Period (DSO)					32.0 (days)
Inventory Turnover					7.0 x Fixed
Asset Turnover					12
Debt Management
Total Debt to Total Assets					50.00%
Times Interest Earned					7.7 x
Profitability
Profit Margin					2.90%
Return on Equity (ROE)					17.50%

ABC Company, a toy manufacturer, believes the coming holiday season (between Thanksgiving in late November and Christmas on the 25th of December) will be a very good one, expecting an increase of 20% in its sales. Outside economic analysts believe the effects of the recent recession are over. Consumer confidence is high. To meet that 20% increase, however, inventories must be built up so, to finance that expansion, ABC wants to borrow $1,000,000 from its bank. You are the loan officer who must make the decision as to whether or not to give ABC the money. You are going to prepare ratios for 3 years, the Cash Conversion Cycle for the same period and operating cash flow for the years for which you have figures. Review the Balance Sheets and Income Statements for ABC over the 3 years and answer the following questions

Operating Cash Flow is the first of the 3 parts to the Statement of Cash Flows.

a) Define operating cash flow. What does it tell us?

b) Calculate ABCs operating cash flows for those years for which figures are available.

c) Does your analysis of ABCs operating cash flows change your conclusions listed in 1) and 2) above?