Hatfield Medical Supplys stock price had been lagging its industry averages, so its board of directors brought in a new CEO, Jaiden Lee. Lee had brought in Ashley Novak, to be the new CFO. Lee asked Novak to develop the financial planning section of the strategic plan. In her previous job, Novaks primary task had been to help clients develop financial forecasts, and that was one reason Lee hired her.

Novak began by comparing Hatfields financial ratios to the industry averages. If any ratio was substandard, she discussed it with the responsible manager to see what could be done to improve the situation. The Mini Case Data spreadsheet shows Hatfields latest financial statements plus some ratios and other data that Novak plans to use in her analysis.

You have been asked to assist in the financial analysis by answering the following questions:

• Using Hatfields data and its industry averages, evaluate how well run Hatfield appears to be in comparison with other firms in its industry. In a paragraph or two, explain the companys primary strengths and weaknesses. Be specific in your answer and point to the various ratios given that support your position.
• Use the AFN equation to estimate Hatfields required new external capital for 2020 if the sales growth rate is 11.1%. Assume that the firms 2019 ratios will remain the same in 2020. (Hint: Hatfield was operating at full capacity in 2019.)
• Define the term capital intensity. In a paragraph or two, explain how a decline in capital intensity would affect the AFN, other things held constant. Would economies of scale combined with rapid growth affect capital intensity, other things held constant? Also, explain how changes in each of the following would affect AFN, holding other things constant: the growth rate, the amount of accounts payable, the profit margin, and the payout ratio.
• Using the forecasted items through 2023 in the spreadsheet, calculate for each of the next four years the net operating profit after taxes (NOPAT), net operating working capital, total operating capital, free cash flow (FCF), annual growth rate in FCF, and return on invested capital.
• this problem is from Corporate finance a focused approach 7th ed