Problems J. WASHAM CALCULATORS 2008 2011 ASSUMPTIONS (current assets shaded) Cash & Equivalents Accounts Receivable Inventory Net Fixed Assets Total Assets 2007 $75 300 $75 400 250 BALANCE SHEETS 2009 2010 $90 $100 600 550 350 250 $100 500 150 250 525 575 610 465 540 $1,440 $1,050 $1,300 $1,650 $1,315 $125 $250 $200 (current liabilities shaded) Accounts Payable Notes Payable Accrued Operating Exp. Long-Term Debt $175 162 $225 136 165 178 99 60 165 89 76 161 400 500 300 100 50 402 Shareholders Equity Total Liabilities & NW 200 $1,050 757.2 $1,650 890.2 $1,440 890.2 $1,315 $1,300 797 35 50 65 70 75 33 28 25 10 INCOME STATEMENTS Revenues (Sales) $1,500 $2,250 $3,000 $2,000 $1,500 Cost of Goods Sold 600 900 1,200 800 600 Operating Expenses 600 895 750 725 Depreciation Interest 30 Taxes 94 325 Net Profit 487.2 213 54 Dividends 80 Using the information contained in J. Washam's financial statements, calculate the CCE, cash ratio, cash burn rate, and net liquid balance. Interpret the trend in these measures. What is your opinion of the firm's liquidity position and why? 188 142 36 141 282 40 80 132 54 18. Monroe's assistant treasurer (see problem 6) estimates the variance of daily net cash flows to be $5,000,000. Again, using a LCL of $0: a. What should the cash return level be, using the Miller-Orr model? b. What is your estimate of the average cash balance if the Miller-Orr calculation is used to set the cash return level? C. How do you explain your finding in part a to the assistant treasurer, who wants to know how to use the information provided by the model? d. If the variance of daily net cash flows is $10,000,000 instead of $5,000,000, how does this change the answer determined in part a? Is the cash return level double your earlier result? How do you interpret this? 9. Conduct a Miller-Orr analysis using the data in problems 6 but with a lower cash limit of $5,000. a. What should the cash return level be, using the Miller-Orr model? b. What is your estimate of the average cash balance if the Miller-Orr calculation is used to set the cash return level? C. How do you explain your finding in part a to the assistant treasurer, who wants to know how to use the information provided by the model? d. If the variance of daily net cash flows is $10,000,000 instead of $5,000,000, how does this change the answer determined in part a? Is the cash return level double your earlier result? How do you interpret this