The Protek Company is a large manufacturer and distributor of electronic components. Because of some successful new products marketed to manufacturers of personal computers, the firm has recently undergone a period of explosive growth, more than doubling its revenues during the last two years. However, the growth has been accompanied by a marked decline in profitability and a precipitous drop in the companys stock price.

You are a financial consultant who has been retained to analyze the companys performance and find out whats going wrong. Your investigative plan involves a series of in-depth interviews with management and doing some independent research on the industry. However, before starting, you want to focus your thinking to be sure you can ask the right questions. Youll begin by analyzing the firms financials over the last three years, which are presented in the supplemental datasheet. Assume the company sold no property, plant, or equipment during the time periods presented. Also assume the company did not repay any long-term debt. The companys normal credit terms extended to its customers is net 30.

Complete the following using Microsoft Excel and Word. All quantitative analysis should be done in Excel, while all qualitative analysis should be completed in Word. Construct horizontal analysis (year-over-year growth) on the financial statements for 2019 and 2020. Analyze the trend in each line; what does the trend analysis reveal? What are strengths, and areas for concern? Construct common size balance sheets for 2018 - 2020, respectively, and common size income statements for 2018 - 2020, respectively. Analyze the trend in each line. What appears to be happening? What are your significant findings? Construct Statements of Cash Flows for 2019 and 2020 using the indirect method. Also compute Free Cash Flow for each year. Where is the companys cash going to and coming from? What are strengths, and areas for concern? Calculate all the financial ratios discussed in chapter 15 (use exhibit 15-6 as a guide) for 2019 and 2020. Analyze trends in each ratio. What can you infer from this information? Make specific statements about liquidity, asset management, debt management, profitability, and market performance. Do not simply say that ratios are higher or lower (or that they are going up or down); instead, think about what might be going on in the company and propose reasons why the ratios are acting as they are. Finally, based on all of your analysis, what two (or more) specific actionable items should the company do to improve its situation? Be specific in your response and discuss the implication of your recommendation.

EXHIBITS: SUPPLEMENTAL DATA (for Protek Company)
All values, except stock price, are in millions ($000,000)
Table 1 Balance Sheets	2018	2019	2020
Assets
Cash	$30	$40	$62
Accounts receivable	175	351	590
Inventory	90	151	300
Gross Property, Plant, & Equipment	1,565	2,373	2,718
Accumulated depreciation	-610	-860	-1,135
Total assets	$1,250	$2,055	$2,535
Liabilities and equity
Accounts payable	$56	$81	$134
Accruals	15	20	30
Long-term debt	630	1,260	1,600
Total equity	549	694	771
Total liabilities and equity	$1,250	$2,055	$2,535
Table 2 Income Statements	2018	2019	2020
Sales	$1,578	$2,106	$3,265
Cost of goods sold	631	906	1,502
Operating expenses:
Depreciation	200	250	275
Administration	126	179	294
Research & Development	158	211	327
Sales and Marketing	116	245	607
Operating Income	347	315	260
Interest expense	63	95	143
Pre-tax Profit	$284	$220	$117
Income Tax Expense (34% tax rate)	97	75	40
Net Income	$187	$145	$77
Table 3 Other Information	2018	2019	2020
Dividends Paid	$0	$0	$0
Stock Issuance	$0	$0	$0
Stock price	$39.27	$26.10	$11.55
Avg. Shares outstanding	100	100	100
Avg. Interest Rate on Long-term debt	10.00%	10.00%	10.00%