Uutul Wine ui ULR OF YOUP paper. Be guided by the following rubric: Content and substance: Depth of discussion Breadth of discussion Ability to provoke critical thinking Organization and presentation Flow of discussion, writing style Formatting, neatness DES STORM ARMADA Company specializes in customized software development for the broadcast and telecommunications industries. The company was started by three people to develop software primarily for a national network to be used in broadcasting national election results. After sustained and manageable growth for many years, the company has grown very fast over the last three years, doubling in size. This growth has placed the company in a challenging financial position. Within thirty days, STORM ARMADA Company will need to renew its P300,000 loan with the Bank of the Philippine Islands. This loan is classified as a current liability on STORM ARMADA Company's balance sheet. Amara Sumi, president of STORM ARMADA Company, is concerned about renewing the loan. The bank has requested STORM ARMADA Company's most recent financial statements which appear below, including balance sheets for this year and last year. Financial statements for STORM ARMADA Company appear below: STORM ARMADA Company Statement of Financial Position December 31. Year 2 and Year 1 (pesos in thousands) Year 2 Year 1 Current assets: Cash and marketable securities.. P 100 P 100 Accounts receivable, net...... 220 190 190 180 Inventory ................ Prepaid expenses ..... 20 520 Total current assets .. Noncurrent assets: 1,940 1.940 Plant & equipment, net. P2.460P2.430 Total assets....... 490 150 P150 150 370 Current liabilities: Accounts payable... Accrued liabilities.... ...... Notes payable, short term.. Total current liabilities....... Noncurrent liabilities: Bonds payable........... Total liabilities.... ...... 100 100 Stockholders' equity: Preferred stock, P10 par, 6%. Common stock, P2 par... Additional paid-in capital-common stock. Retained earnings.......... Total stockholders' equity...... Total liabilities & stockholders' equity ............... STORM ARMADA Company Income Statement For the Year Ended December 31. Year 2 (pesos in thousands) Sales (all on account).... Cost of goods sold........... Gross margin............. Operating expenses................. Net operating income............. Interest expense...... Net income before taxes............... Income taxes (30%) .... Net income.......... P1.770 1.230 330 P210 PARTI A What are the Limitations of financial statement analysis Discuss briefly B. Would you advice Bank of the Philippine Islands to approve the renewal of the loan. Why? Explain by substantiating your answer. c. If you were asked to value the company as a prospective investor, identity the accounts, ratios, numbers. (etc)... you will use and explain how are you going to use them. What would you advise prospective investors D. Recommend at least ten strategies/ operating tactics to improve the company's Cash Conversion Cycle E As of this point, do you think that the difference between market value and book value suggest that the stock at its current price is too high Continuation..) IN ITS TENTH YEAR of operation. STORM ARMADA Company has the following data Equity Ratio Margin of Safety Contribution Margin Roto 40% Sales P 3.000.000 Ave. Total Assets P 12.000.000 Dividend per shore P0.25 Earnings per Share P320 Market value of stock P 20.00 The president and the directors are not satisfied with the current growth rate of the company which is below the industry standards. They believe that this could be increased to 6.25% by taking on additional leverage (both operating and financial) by purchasing an operating asset that would significantly change the structure of the company's operating costs. This, together with coming up of good dividend policies to improve the retention rate, would be more practical as of this point because all possible markets have been penetrated and the demand for the company's products and services is estimated to remain for the next 6 to 8 years. Being conservative on their estimates for the following years, the company would still maintain the same level of expected sales and net profit margins, but with the following changes: Equity Ratio Contribution Margin Ratio Ave. Total Assets (new) Earnings per Share From 80% to 60% From 40% to 50% P 15,000,000 P 3.20 P 25.00 Estimated market value of stock (based on dividend valuation model) Book value of the stock P 12.50/ share Estimated market value of stock (based on dividend P 25.00 valuation model) Book value of the stock P 12.50/ share PART II A. Assume that you are an owner of several hundred shares of STORM ARMADA Company's stock, are you going to retain, sell, or buy more of the company's stock Defend your answer by siting and interpreting indicators. B. Compute for the Growth Rate and the Price Earnings before the strategies proposed above were implemented by the board and the president. C. Compute for the dividend per share and debt ratio that would accompany the proposed changes of the board and directors. D. What are the advantages and disadvantages of the follow company as a whole Why do you say so? Explain. (Substantiate your answers by identifying your indicators.) purchasing the preferred stock, STORM Five years ago, STORM ARMALA Company purchased 600 shares of 9%, P100 par value stock for P75 per share. Sarver received dividends on the stock each year for five year ar for five years, and finally sold the stock for P90 per share. Instead of preferred stock, STORM ARMADA Company could have invested the funds in a money market certificate viel money market certificate yielding a 16% rate of return. APMADA Company is considering project NAOSUMI that would initial investment of P462,000 and would have a useful life of 7 years. cash receipts would be P300,000 and the annual cash expenses 120.000. The salvage value of the assets used in the project would be The company's tax rate is 30%. For tax purposes, the entire initial investment wh stment without any reduction for salvage value will be depreciated over 5 s. The company uses a discount rate of 18% for this kind of project. THIS YEAR, STORM ARMADA Company require an initial investment of P The annual cash receipts wou would be P120.000. The salvage time STORM ARMADA Company was able to reduce its cost of capital to 12% After sometime, STORM ARMADA Cor ch is normally used as a hurdle rate for most of its capital expenditures and has be the following analysis for four projects for the upcoming year: Project 1 Project 2 Project 3 Project 4 Initial cash outlay P200,000 P298,000 P248,000 P272,000 Annual net cash inflows Year 1 P 65,000 P100,000 P 80.000 P 95,000 Year 2 70.000 135.000 95.000 125.000 80,000 90.000 90.000 90.000 Year 4 40,000 65,000 80.000 60,000 (3,798) 4,276 14,064 Net present value 14,662 98% 106% 105% Profitability index 11% 14% 15% 13% Internal rate of return Year 3 101% WHUI Wille une vuer Of Your paper. Be guided by the following rubric: Content and substance: Depth of discussion Breadth of discussion Ability to provoke critical thinking Organization and presentation Flow of discussion, writing style Formatting, neatness 209 STORM ARMADA Company specializes in customized software development for the broadcast and telecommunications industries. The company was started by three people to develop software primarily for a national network to be used in broadcasting national election results. After sustained and manageable growth for many years, the company has grown very fast over the last three years, doubling in size. This growth has placed the company in a challengina financial position. Within thirty days, STORM ARMADA Company will need to renew its P300,000 loan with the Bank of the Philippine Islands. This loan is classified as a current liability on STORM ARMADA Company's balance sheet. Amara Sumi, president of STORM ARMADA Company, is concerned about renewing the loan. The bank has requested STORM ARMADA Company's most recent financial statements which appear below, including balance sheets for this year and last year. Financial statements for STORM ARMADA Company appear below: Year 1 P 100 STORM ARMADA Company Statement of Financial Position December 31, Year 2 and Year 1 (pesos in thousands) Year 2 Current assets: Cash and marketable securities........... P 100 Accounts receivable, net ........ Inventory ................ Prepaid expenses.............. Total current assets .... Noncurrent assets: Plant & equipment, net.. Total assets. la sb788 Sko Eskog ales sobre P150 P150 Current liabilities: Accounts payable.... Accrued liabilities..... Notes payable, short term.... Total current liabilities..... Noncurrent liabilities: Bonds payable........ Total liabilities......... 100 Stockholders' equity: Preferred stock, P10 par, 6%.... Common stock, P2 par..... 100 Additional paid in capital-common stock. 180 180 Retained earnings... 230 230 1.300 Total stockholders' equity..... 1.250 1.810 1.760 Total liabilities & stockholders' equity ............ P2.460P2.439 STORM ARMADA Company Income Statement For the Year Ended December 31, Year 2 (pesos in thousands) Sales (all on account).. P1.770 Cost of goods sold... 1.230 Gross margin............ 540 Operating expenses.. _210 Net operating income..... Interest expense...... Net income before taxes... Income taxes (30%) ..... Net income..... P_210 999999999 PARTI A. What are the Limitations of financial statement analysis & Discuss briefly. B. Would you advice Bank of the Philippine Islands to approve the renewal of the loan. Why? Explain by substantiating your answer. C. If you were asked to value the company as a prospective investor, identify the accounts, ratios, numbers,(etc)... you will use and explain how are you going to use them. What would you advise prospective investors D. Recommend at least ten strategies/ operating tactics to improve the company's Cash Conversion Cycle E. As of this point, do you think that the difference between market value and book value suggest that the stock at its current price is too high Uutul Wine ui ULR OF YOUP paper. Be guided by the following rubric: Content and substance: Depth of discussion Breadth of discussion Ability to provoke critical thinking Organization and presentation Flow of discussion, writing style Formatting, neatness DES STORM ARMADA Company specializes in customized software development for the broadcast and telecommunications industries. The company was started by three people to develop software primarily for a national network to be used in broadcasting national election results. After sustained and manageable growth for many years, the company has grown very fast over the last three years, doubling in size. This growth has placed the company in a challenging financial position. Within thirty days, STORM ARMADA Company will need to renew its P300,000 loan with the Bank of the Philippine Islands. This loan is classified as a current liability on STORM ARMADA Company's balance sheet. Amara Sumi, president of STORM ARMADA Company, is concerned about renewing the loan. The bank has requested STORM ARMADA Company's most recent financial statements which appear below, including balance sheets for this year and last year. Financial statements for STORM ARMADA Company appear below: STORM ARMADA Company Statement of Financial Position December 31. Year 2 and Year 1 (pesos in thousands) Year 2 Year 1 Current assets: Cash and marketable securities.. P 100 P 100 Accounts receivable, net...... 220 190 190 180 Inventory ................ Prepaid expenses ..... 20 520 Total current assets .. Noncurrent assets: 1,940 1.940 Plant & equipment, net. P2.460P2.430 Total assets....... 490 150 P150 150 370 Current liabilities: Accounts payable... Accrued liabilities.... ...... Notes payable, short term.. Total current liabilities....... Noncurrent liabilities: Bonds payable........... Total liabilities.... ...... 100 100 Stockholders' equity: Preferred stock, P10 par, 6%. Common stock, P2 par... Additional paid-in capital-common stock. Retained earnings.......... Total stockholders' equity...... Total liabilities & stockholders' equity ............... STORM ARMADA Company Income Statement For the Year Ended December 31. Year 2 (pesos in thousands) Sales (all on account).... Cost of goods sold........... Gross margin............. Operating expenses................. Net operating income............. Interest expense...... Net income before taxes............... Income taxes (30%) .... Net income.......... P1.770 1.230 330 P210 PARTI A What are the Limitations of financial statement analysis Discuss briefly B. Would you advice Bank of the Philippine Islands to approve the renewal of the loan. Why? Explain by substantiating your answer. c. If you were asked to value the company as a prospective investor, identity the accounts, ratios, numbers. (etc)... you will use and explain how are you going to use them. What would you advise prospective investors D. Recommend at least ten strategies/ operating tactics to improve the company's Cash Conversion Cycle E As of this point, do you think that the difference between market value and book value suggest that the stock at its current price is too high Continuation..) IN ITS TENTH YEAR of operation. STORM ARMADA Company has the following data Equity Ratio Margin of Safety Contribution Margin Roto 40% Sales P 3.000.000 Ave. Total Assets P 12.000.000 Dividend per shore P0.25 Earnings per Share P320 Market value of stock P 20.00 The president and the directors are not satisfied with the current growth rate of the company which is below the industry standards. They believe that this could be increased to 6.25% by taking on additional leverage (both operating and financial) by purchasing an operating asset that would significantly change the structure of the company's operating costs. This, together with coming up of good dividend policies to improve the retention rate, would be more practical as of this point because all possible markets have been penetrated and the demand for the company's products and services is estimated to remain for the next 6 to 8 years. Being conservative on their estimates for the following years, the company would still maintain the same level of expected sales and net profit margins, but with the following changes: Equity Ratio Contribution Margin Ratio Ave. Total Assets (new) Earnings per Share From 80% to 60% From 40% to 50% P 15,000,000 P 3.20 P 25.00 Estimated market value of stock (based on dividend valuation model) Book value of the stock P 12.50/ share Estimated market value of stock (based on dividend P 25.00 valuation model) Book value of the stock P 12.50/ share PART II A. Assume that you are an owner of several hundred shares of STORM ARMADA Company's stock, are you going to retain, sell, or buy more of the company's stock Defend your answer by siting and interpreting indicators. B. Compute for the Growth Rate and the Price Earnings before the strategies proposed above were implemented by the board and the president. C. Compute for the dividend per share and debt ratio that would accompany the proposed changes of the board and directors. D. What are the advantages and disadvantages of the follow company as a whole Why do you say so? Explain. (Substantiate your answers by identifying your indicators.) purchasing the preferred stock, STORM Five years ago, STORM ARMALA Company purchased 600 shares of 9%, P100 par value stock for P75 per share. Sarver received dividends on the stock each year for five year ar for five years, and finally sold the stock for P90 per share. Instead of preferred stock, STORM ARMADA Company could have invested the funds in a money market certificate viel money market certificate yielding a 16% rate of return. APMADA Company is considering project NAOSUMI that would initial investment of P462,000 and would have a useful life of 7 years. cash receipts would be P300,000 and the annual cash expenses 120.000. The salvage value of the assets used in the project would be The company's tax rate is 30%. For tax purposes, the entire initial investment wh stment without any reduction for salvage value will be depreciated over 5 s. The company uses a discount rate of 18% for this kind of project. THIS YEAR, STORM ARMADA Company require an initial investment of P The annual cash receipts wou would be P120.000. The salvage time STORM ARMADA Company was able to reduce its cost of capital to 12% After sometime, STORM ARMADA Cor ch is normally used as a hurdle rate for most of its capital expenditures and has be the following analysis for four projects for the upcoming year: Project 1 Project 2 Project 3 Project 4 Initial cash outlay P200,000 P298,000 P248,000 P272,000 Annual net cash inflows Year 1 P 65,000 P100,000 P 80.000 P 95,000 Year 2 70.000 135.000 95.000 125.000 80,000 90.000 90.000 90.000 Year 4 40,000 65,000 80.000 60,000 (3,798) 4,276 14,064 Net present value 14,662 98% 106% 105% Profitability index 11% 14% 15% 13% Internal rate of return Year 3 101% WHUI Wille une vuer Of Your paper. Be guided by the following rubric: Content and substance: Depth of discussion Breadth of discussion Ability to provoke critical thinking Organization and presentation Flow of discussion, writing style Formatting, neatness 209 STORM ARMADA Company specializes in customized software development for the broadcast and telecommunications industries. The company was started by three people to develop software primarily for a national network to be used in broadcasting national election results. After sustained and manageable growth for many years, the company has grown very fast over the last three years, doubling in size. This growth has placed the company in a challengina financial position. Within thirty days, STORM ARMADA Company will need to renew its P300,000 loan with the Bank of the Philippine Islands. This loan is classified as a current liability on STORM ARMADA Company's balance sheet. Amara Sumi, president of STORM ARMADA Company, is concerned about renewing the loan. The bank has requested STORM ARMADA Company's most recent financial statements which appear below, including balance sheets for this year and last year. Financial statements for STORM ARMADA Company appear below: Year 1 P 100 STORM ARMADA Company Statement of Financial Position December 31, Year 2 and Year 1 (pesos in thousands) Year 2 Current assets: Cash and marketable securities........... P 100 Accounts receivable, net ........ Inventory ................ Prepaid expenses.............. Total current assets .... Noncurrent assets: Plant & equipment, net.. Total assets. la sb788 Sko Eskog ales sobre P150 P150 Current liabilities: Accounts payable.... Accrued liabilities..... Notes payable, short term.... Total current liabilities..... Noncurrent liabilities: Bonds payable........ Total liabilities......... 100 Stockholders' equity: Preferred stock, P10 par, 6%.... Common stock, P2 par..... 100 Additional paid in capital-common stock. 180 180 Retained earnings... 230 230 1.300 Total stockholders' equity..... 1.250 1.810 1.760 Total liabilities & stockholders' equity ............ P2.460P2.439 STORM ARMADA Company Income Statement For the Year Ended December 31, Year 2 (pesos in thousands) Sales (all on account).. P1.770 Cost of goods sold... 1.230 Gross margin............ 540 Operating expenses.. _210 Net operating income..... Interest expense...... Net income before taxes... Income taxes (30%) ..... Net income..... P_210 999999999 PARTI A. What are the Limitations of financial statement analysis & Discuss briefly. B. Would you advice Bank of the Philippine Islands to approve the renewal of the loan. Why? Explain by substantiating your answer. C. If you were asked to value the company as a prospective investor, identify the accounts, ratios, numbers,(etc)... you will use and explain how are you going to use them. What would you advise prospective investors D. Recommend at least ten strategies/ operating tactics to improve the company's Cash Conversion Cycle E. As of this point, do you think that the difference between market value and book value suggest that the stock at its current price is too high