Financial Statements for XYZ Corp.

Balance Sheet for Period Ending December 31.

Assets	2017	2018
Cash and Marketable Securities	40	15
Accounts Receivable	160	80
Inventories	250	370
Total Current Assets	450	465
Gross Plant and Equipment	675	855
less: Accumulated Depreciation	250	300
Net Plant and Equipment	425	555
Total Assets	875	1020
Liabilities and Equity
Accounts Payable	15	30
Short-term Bank Loans	35	40
Accrued Liabilities	55	60
Total Current Liabilities	105	130
Long-Term Debt	265	360
Common Stock	180	180
Retained Earnings	325	350
Total Equity	505	530
Total Liabilities and Equity	875	1020

Income Statement for the Period Ending December 31.

	2018
Sales	1500
Cost of Goods Sold	1272
Gross Profit Margin	228
Administrative Expense	40
Marketing Expense	30
Research and Development	20
Depreciation	50
Earnings before Interest and Taxes	88
Interest Expense	39
Income before Taxes	49
Income Taxes @ 40%	20
Net Income	29

1) Use the attached financial statements for XYZ Corp. for this problem.

a) Find the net cash burn for 2018. Show both the cash burn and cash build.

b) Explain what cash burn and cash build each represent.

c) If the net cash burn is negative, how many months until you run out of cash?

2) A proposed project has fixed costs of $25,000 and depreciation of $8,000 per year. The variable costs are $7 per unit and sales are $9 per unit.

a) What is the breakeven point in units produced?

b) What is the breakeven point in dollars of revenue?

c) If the operating profit at 20,000 units is $7,000. What is the degree of operating leverage?

d) If sales increase to 22,000 units, what will operating profits be? What will the new operating leverage be?

3) Calculate the following based on 2018 numbers using the attached financial

statements for XYZ Corp. Assume the only variable cost is the cost of goods sold.

a) Survival revenues (EBITDA breakeven includes interest).

b) NOPAT Breakeven

c) Interpret these values and indicate what you would expect to happen to them if a

large addition is made to fixed assets.

4) Find the cash conversion cycle for XYZ in 2018. If the industry averages are 30 days for sales to cash, 75 days for inventory to sales and 30 days for purchase to payment, where is XYZ performing better or worse than the industry? How does the XYZ cash conversion cycle compare to the industry? Should XYZ address any or all of these differences and why?

5) Prepare the 2018 cash flow statement for XYZ Corp. Assume no dividends were

paid.