Imperial Packaging, Inc. is a producer of custom packaging, everything from sturdy cartons and cases for protecting fragile items on long trips to artistic displays and coverings for products and their packaging. Their clientele are high-end producers of custom products that are marketed for their unique style and sophistication. You are a financial analyst for the firm, and the CFO has assigned you to help him explain the 2018 results as reflected in the financial statements given in the table at the end of this document.

The firm has been growing steadily, with sales growth at around 6% per year since 2014. Imperial issued new long-term debt in 2015 and again in 2017, and they also issued new common equity in 2016 and 2018. During the period 2015 2017, the firm was able to increase the common dividend by 5% each year and still have a positive addition to retained earnings. However, in 2018, the firm was unable to increase the dividend, and yet also had a negative addition to retained earnings (i.e., retained earnings on the balance sheet fell in 2018). The CFO would like to increase the dividend by 5% in 2019, and so she needs you to analyze the firms financial statements over the past five years, and to forecast the pro forma financial statements for 2019 and analyze them as well.

You are to recreate the financial statements in the table at the end of this document in an Excel spreadsheet, then do a complete ratio and metrics analysis, similar to what was done for Marquardt Manufacturing in the textbook (you may use that as a template for your analysis), also in an Excel spreadsheet. Include all the ratios offered in the chapter, and the value metrics MVA, EVA and ROIC. Create common-size statements and do a percent change analysis as well. The CFO needs you to determine two things:

1. What drove the results that made it impossible to increase the dividend in 2018?
2. Are we on track to be able to afford growing the dividend by 5% in 2019?

Make the following assumptions during the analysis:

• In 2019 sales growth will be in line with growth in 2015 2018;
• No new net fixed assets will be required to meet the 2019 sales forecast;
• The 2019PF dividend will be $2.44 per share.

Use the percent of sales method as taught in the chapter to forecast the 2019 pro forma statements. Write a concise (one page) paper outlining the results of your analysis and answering the two questions posed to you by the CFO (address me as the CFO).

All of your ratio calculations should refer to the appropriate cells in the financial statements (for example, the Current Ratio should divide the Total Current Assets for a given year by the Total Current Liabilities for the same year). None of the calculations in the ratios or metrics should be hard-coded, with the exception of dividing numbers by 365 to get a daily figure from an annual number, or dividing by 12 to get a monthly figure from an annual number. Otherwise all calculations should refer directly to cells in the financial statements.