Financial
Statement Analysis
MG
770
Final Exam â
Fall 2014
Part 2 – Problem
Solving â
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Answers to be submitted on Excel Answer Sheet
(show work or use formulas when
appropriate)
Use
the following information about XYZ Plumbing (FY=12/31), a public company with
the most recent
closing
stock price of $5.00, to answer the following three problems
–
——————————————————————————————————
Income
Statement
2012
2013
Revenue
$
10,000,000
$
12,000,000
CGS
4,000,000
4,800,000
Gross
Profit
$
6,000,000
$
7,200,000
SG&A
1,800,000
2,000,000
R&D
1,000,000
1,000,000
Deprec &
Amort
500,000
550,000
Total Op.
Expense
3,300,000
3,550,000
Operating
Profit
$
2,700,000
$
3,650,000
Interest cost
520,000
600,000
Interest income
90,000
110,000
Pre-Tax
$
2,270,000
$
3,160,000
Tax (35% rate)
794,500
1,106,000
Net Income
$
1,475,500
$
2,054,000
EPS – Basic
$
0.15
$
0.21
Average Shares
Outstanding
10,000,000
10,000,000
Balance Sheet
2012
2013
2013
2013
ASSETS
LIABILITIES
Cash
3,000,000
4,154,000
Accounts
Payable
500,000
500,000
A/R
1,000,000
1,500,000
Notes Payable
1,500,000
1,000,000
Inventory
2,000,000
2,300,000
Current portion
of LTD
1,000,000
1,000,000
Pre-paid
expenses
500,000
670,000
Accrued
Liabilities
500,000
520,000
Total Current
Assets
6,500,000
8,624,000
Total Current
Liabilities
3,500,000
3,020,000
Building and
Improvements
15,000,000
15,000,000
Long-Term Debt
12,000,000
14,000,000
Equipment
5,000,000
7,000,000
20,000,000
22,000,000
Stockholder’s
Equity
Common Stock at
Par
100,000
100,000
Depreciation
500,000
1,050,000
Paid in Capital
9,900,000
9,900,000
Net PP&E
19,500,000
20,950,000
Retained
Earnings
500,000
2,554,000
Total
Stockholder’s Equity
10,500,000
12,554,000
Total
Assets
26,000,000
29,574,000
Total
Liabilities + Equity
26,000,000
29,574,000
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Financial
Statements – Final Exam Fall 2014 – 1 –
1.
(26 Points)
Complete
the following cash Flow Statement for XYZ Plumbing for 2013
Statement of Cash
Flows
2013
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Net Income
Adjustments
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Depreciation and amortization
Cash Provided by Operating Assets
and Liabilities
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Accounts Receivable
Inventories
Pre-paid expenses
Accounts payable
Accrued liabilities
Net Cash provided (used) by
operating activities
Cash Provided from Investing
Activities
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Additions to property, plant and
equipment
Net Cash provided (used) by
investing activities
Cash Provided from Financing
Activities
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Additions to long term borrowing
Addition to short term borrowing
Net Cash provided (used) by
financing activities
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Net Cash Flow
2. (
6 Points)
Calculate the
following ratios for 2013:
2013
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Current
Ratio
Accounts
Receivable turnover Inventory turnover
Revenue
to Cash Return on Assets Return on Equity
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Financial
Statements – Final Exam Fall 2014 – 2 –
3.
(18 Points,1 point for each correct box except diluted shares –
6 points)
3.)
Fill in the projections for XYZ for 2003, based on the following assumptions:
1.
Revenue grows by 20% between 2013 and
2014.
2.
Gross Margins remain at
2013 levels.
3.
SG&A improves by 1% (as a % of
revenue)
4.
R&D increases by 20%.
5.
Depreciation and Amortization costs do
not change between 2013 and 2014.
6.
Interest costs and expenses are given in
the table.
7.
The tax rate remains constant.
8.
Options and Warrants are listed in the
following table:
Options
Amount
Exercise Price
Public
Warrants
Amount
Exercise Price
Officers and Directors
2,000,000
$2.00
Shareholders
4,000,000
$3.00
2014E
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Revenue
CGS
Gross Profit
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SG&A
R&D
Deprec &
Amort
Total Op.
Expense
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Operating Profit
Interest cost
Interest income
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Pre-Tax
Tax (35% rate)
Net Income
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EPS – Basic
EPS – Diluted
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Financial
Statements – Final Exam Fall 2014 – 3 –
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