Case Assignment NMG, Inc. is a clothing manufacturer that designs and markets new women clothing. The...

Transcribed Image Text:

Case Assignment NMG, Inc. is a clothing manufacturer that designs and markets new women clothing. The company just closed Fiscal Year 2023 ending December 31st and completed the balance sheet and income statement. You are hired as a Financial Analyst and asked to perform the following tasks: 1-Prepare a forecasted income statement, balance sheet and cash flow statement for the company for 2024. (50 pts) 2- a- Calculate the listed financial ratios for 2023 (13 points). b- Using the past three years data for the company, perform financial ratio analysis. (17 points) 3-Compare and contrast the company's 2023 ratios with those of the industry. (10 points) Forecasting assumptions for 2024: 1- Revenue will grow by 10% and the tax rate will be 21%. 2- The CAPEX will be 6.5% of Revenue and Depreciation expense will be 6.2% of Property, equipment, and leasehold improvements gross at the start of the year which was $10, 985 million. 3- The company issues $105 million of stock-based compensation, and it is fully vested. Additional paid- in capital will increase by the same amount. The company includes this form of compensation in operating expenses. 4- The company has a dividend payout ratio of 25.6% of net income. 5- No change in the following income statement accounts: Amortization of intangibles, Interest income, Interest expense, and Other, net. 6- No change in the following balance sheet statement accounts: Goodwill, Long-term debts less current portion, Ordinary shares, Other comprehensive loss. 7-There is no change in macroeconomic readings, including the inflation rate. 8- The Restructuring and other, net is zero. 9- Consider the following accounts increase based on the percentage of the revenue in 2024. Accounts receivable, net 8.20% Inventories 8.20% Other current assets 2.50% Deferred income taxes 9.20% Other assets, net 1.80% Accounts payable 14.50% Accrued employee compensation 2.40% Accrued warranty 0.85% Accrued expenses 6.40% Long-term accrued warranty 1% Other non-current liabilities 1.20% RATIO ANALYSIS CURRENT RATIO QUICK RATIO INVENTORY TURNOVER (days) INTEREST COVERAGE ASSET TURNOVER (days) RECEIVABLES TURNOVER (days) GROSS MARGIN OPERATING MARGIN PROFIT MARGIN ROA ROE Debt to equity Dividend pay-out ratio NMG, Inc. Industry Average 2023 1.98 1.24 93 4.26 529 58 32.50% 7.30% 5% 3.70% 6.70% 1.01 0.28 NMG, Inc. Net Income statements (in millions) 2023 2022 2021 for the year ending December 31. Revenue Cost of Revenue $10,390 $11,184 $10,771 $6,939 $7,261 $7,058 Gross Profit Product Development Marketing and Administrative Depreciation Amortization of Intangibles Restructuring and other, net Stock-based compensation Total Operating Expenses Income from Operations Interest Income Interest Expense Other, net Other expenses, net Income before Income Taxes (Benefit) provision for income taxes Net Income NMG, Inc. Consolidated Balance Sheets $3,451 $3,923 $3,713 $991 $1,026 $1,232 $453 $562 $606 $520 $559 $539 $23 $53 $104 ($22) $89 $178 $0 $0 $0 $1,965 $2,289 $2,659 $1,486 $1,634 $1,054 $84 $38 $12 ($224) ($236) ($222) $25 ($18) ($29) ($115) ($216) ($239) $1,371 $1,418 $815 ($640) $236 $43 $2,011 $1,182 $772 (In millions except share and per share data) 2023 2022 2021 as of December 31. Current Assets Cash and Cash Equivalents $2,220 $1,853 $2,539 Accounts receivables, net $989 $1,184 $1,199 Inventories $970 $1,053 $982 Other current assets $184 $220 $321 Total current assets $4,363 $4,310 $5,041 Property, Equipment and leasehold improvements, net $1,869 Investment in debt security $0 $1,792 $1,875 $1,275 $0 Goodwill $1,237 $1,237 $1,238 Other intangible assets, net $111 $188 $281 Deferred income taxes Other assets, net Total Assets Current Liabilities $1,114 $417 $609 $191 $191 $224 $8,885 $9,410 $9,268 Accounts payable Accrued employee compensation Accrued warranty Current portion of long-term debt Accrued expenses Total current liabilities Long-term accrued warranty $1,420 $1,728 $1,626 $169 $253 $237 $91 $112 $113 $0 $499 $0 $552 $598 $650 $2,232 $3,190 $2,626 $104 $125 $120 $4 $10 $15 $130 $100 $122 Long-term accrued income taxes Other non-current liabilities Long-term debt less current portion $4,253 $4,320 $5,021 Total Liabilities $6,723 $7,745 $7,904 Shareholders' Equity Ordinary shares-par value $0.0001, 2.6 billion shares. authorized, 1,354,218,154, and 1,340,697,595 shares issued and outstanding, respectively Additional paid in capital $6,545 $6,377 $6,152 Accumulated other comprehensive Income (loss) ($34) Retained Earnings Total Shareholders' equity ($16) ($17) ($4,349) ($4,696) ($4,771) $2,162 $1,665 $1,364 Total liabilities and shareholders' equity $8,885 $9,410 $9,268 Requirements - Paper Format 1. All papers should be double spaced, using an 11- or 12-point font. Refer to the APA Style Sheet for additional information. 2. The length of the case assignment should not exceed 15 pages, not counting the cover page, table of contents, nor appendices. 3. The first page should include the title of the work, student name, course number and title, date, and professor name. 4. The second page should be a table of contents. It should, at a minimum, reflect the required items listed for the case assignment. 5. Follow APA style for general format and citations. See the APA Guidelines (https://owl.purdue.edu/owl/research and citation/apa style/apa formatting and style guid e/in text citations the basics.html) 6. The paper sections must adhere to the guidelines below, and each section must be labeled in the text. 7. The language should be clear, concise, and precise. 8. The tone should be professional, consistent, and not filled with jargon. 9. Grammar and syntax (sentence structure) must be correct. 10. The report must be free of misspellings and typos. Table and Figures 1. All figures and tables must be referred to in your text before they appear on the page. 2. Figures and tables should appear on the same page as, or the page after, the text that refers to them. 3. All figures and tables need captions. Captions go below figures and above tables. Quotations and Citations 1. Quotations and citations are crucial components of a research paper and must be present. 2. Failure to properly cite research sources and borrowed ideas is plagiarism. 3. Refer to the APA style guide for assistance with properly citing quoted or borrowed materials and ideas. 4. Turnitin (see Turnitin.com) is used on all reports and projects. Make sure that you are in compliance with the 20/80 rule. Grading Rubric Question 1 Excellent Performed correct forecasted Good 2 or less minor calculation errors. 2 financial statements. No calculation error, clear presentation of solutions with steps shown. 40-50 Average 2 or less major calculation errors. Below Average Major omissions Max Points and incorrect calculations Performed correct and detailed Profitability and Risk Analysis using correct calculation of the financial ratios for each category. No calculation errors. 24-39 2 or less minor calculation errors and overall good Profitability and Risk Analysis Or Correct calculation of the financial ratios but not enough Profitability and Risk Analysis details provided. 10-23 2 or less major calculation errors and not enough Profitability and Risk Analysis provided. 0-9 Incorrect Risk Analysis, and major calculation errors of the financial ratios. 50 50 27-30 5-15 0-4 30 16-26 Case Assignment NMG, Inc. is a clothing manufacturer that designs and markets new women clothing. The company just closed Fiscal Year 2023 ending December 31st and completed the balance sheet and income statement. You are hired as a Financial Analyst and asked to perform the following tasks: 1-Prepare a forecasted income statement, balance sheet and cash flow statement for the company for 2024. (50 pts) 2- a- Calculate the listed financial ratios for 2023 (13 points). b- Using the past three years data for the company, perform financial ratio analysis. (17 points) 3-Compare and contrast the company's 2023 ratios with those of the industry. (10 points) Forecasting assumptions for 2024: 1- Revenue will grow by 10% and the tax rate will be 21%. 2- The CAPEX will be 6.5% of Revenue and Depreciation expense will be 6.2% of Property, equipment, and leasehold improvements gross at the start of the year which was $10, 985 million. 3- The company issues $105 million of stock-based compensation, and it is fully vested. Additional paid- in capital will increase by the same amount. The company includes this form of compensation in operating expenses. 4- The company has a dividend payout ratio of 25.6% of net income. 5- No change in the following income statement accounts: Amortization of intangibles, Interest income, Interest expense, and Other, net. 6- No change in the following balance sheet statement accounts: Goodwill, Long-term debts less current portion, Ordinary shares, Other comprehensive loss. 7-There is no change in macroeconomic readings, including the inflation rate. 8- The Restructuring and other, net is zero. 9- Consider the following accounts increase based on the percentage of the revenue in 2024. Accounts receivable, net 8.20% Inventories 8.20% Other current assets 2.50% Deferred income taxes 9.20% Other assets, net 1.80% Accounts payable 14.50% Accrued employee compensation 2.40% Accrued warranty 0.85% Accrued expenses 6.40% Long-term accrued warranty 1% Other non-current liabilities 1.20% RATIO ANALYSIS CURRENT RATIO QUICK RATIO INVENTORY TURNOVER (days) INTEREST COVERAGE ASSET TURNOVER (days) RECEIVABLES TURNOVER (days) GROSS MARGIN OPERATING MARGIN PROFIT MARGIN ROA ROE Debt to equity Dividend pay-out ratio NMG, Inc. Industry Average 2023 1.98 1.24 93 4.26 529 58 32.50% 7.30% 5% 3.70% 6.70% 1.01 0.28 NMG, Inc. Net Income statements (in millions) 2023 2022 2021 for the year ending December 31. Revenue Cost of Revenue $10,390 $11,184 $10,771 $6,939 $7,261 $7,058 Gross Profit Product Development Marketing and Administrative Depreciation Amortization of Intangibles Restructuring and other, net Stock-based compensation Total Operating Expenses Income from Operations Interest Income Interest Expense Other, net Other expenses, net Income before Income Taxes (Benefit) provision for income taxes Net Income NMG, Inc. Consolidated Balance Sheets $3,451 $3,923 $3,713 $991 $1,026 $1,232 $453 $562 $606 $520 $559 $539 $23 $53 $104 ($22) $89 $178 $0 $0 $0 $1,965 $2,289 $2,659 $1,486 $1,634 $1,054 $84 $38 $12 ($224) ($236) ($222) $25 ($18) ($29) ($115) ($216) ($239) $1,371 $1,418 $815 ($640) $236 $43 $2,011 $1,182 $772 (In millions except share and per share data) 2023 2022 2021 as of December 31. Current Assets Cash and Cash Equivalents $2,220 $1,853 $2,539 Accounts receivables, net $989 $1,184 $1,199 Inventories $970 $1,053 $982 Other current assets $184 $220 $321 Total current assets $4,363 $4,310 $5,041 Property, Equipment and leasehold improvements, net $1,869 Investment in debt security $0 $1,792 $1,875 $1,275 $0 Goodwill $1,237 $1,237 $1,238 Other intangible assets, net $111 $188 $281 Deferred income taxes Other assets, net Total Assets Current Liabilities $1,114 $417 $609 $191 $191 $224 $8,885 $9,410 $9,268 Accounts payable Accrued employee compensation Accrued warranty Current portion of long-term debt Accrued expenses Total current liabilities Long-term accrued warranty $1,420 $1,728 $1,626 $169 $253 $237 $91 $112 $113 $0 $499 $0 $552 $598 $650 $2,232 $3,190 $2,626 $104 $125 $120 $4 $10 $15 $130 $100 $122 Long-term accrued income taxes Other non-current liabilities Long-term debt less current portion $4,253 $4,320 $5,021 Total Liabilities $6,723 $7,745 $7,904 Shareholders' Equity Ordinary shares-par value $0.0001, 2.6 billion shares. authorized, 1,354,218,154, and 1,340,697,595 shares issued and outstanding, respectively Additional paid in capital $6,545 $6,377 $6,152 Accumulated other comprehensive Income (loss) ($34) Retained Earnings Total Shareholders' equity ($16) ($17) ($4,349) ($4,696) ($4,771) $2,162 $1,665 $1,364 Total liabilities and shareholders' equity $8,885 $9,410 $9,268 Requirements - Paper Format 1. All papers should be double spaced, using an 11- or 12-point font. Refer to the APA Style Sheet for additional information. 2. The length of the case assignment should not exceed 15 pages, not counting the cover page, table of contents, nor appendices. 3. The first page should include the title of the work, student name, course number and title, date, and professor name. 4. The second page should be a table of contents. It should, at a minimum, reflect the required items listed for the case assignment. 5. Follow APA style for general format and citations. See the APA Guidelines (https://owl.purdue.edu/owl/research and citation/apa style/apa formatting and style guid e/in text citations the basics.html) 6. The paper sections must adhere to the guidelines below, and each section must be labeled in the text. 7. The language should be clear, concise, and precise. 8. The tone should be professional, consistent, and not filled with jargon. 9. Grammar and syntax (sentence structure) must be correct. 10. The report must be free of misspellings and typos. Table and Figures 1. All figures and tables must be referred to in your text before they appear on the page. 2. Figures and tables should appear on the same page as, or the page after, the text that refers to them. 3. All figures and tables need captions. Captions go below figures and above tables. Quotations and Citations 1. Quotations and citations are crucial components of a research paper and must be present. 2. Failure to properly cite research sources and borrowed ideas is plagiarism. 3. Refer to the APA style guide for assistance with properly citing quoted or borrowed materials and ideas. 4. Turnitin (see Turnitin.com) is used on all reports and projects. Make sure that you are in compliance with the 20/80 rule. Grading Rubric Question 1 Excellent Performed correct forecasted Good 2 or less minor calculation errors. 2 financial statements. No calculation error, clear presentation of solutions with steps shown. 40-50 Average 2 or less major calculation errors. Below Average Major omissions Max Points and incorrect calculations Performed correct and detailed Profitability and Risk Analysis using correct calculation of the financial ratios for each category. No calculation errors. 24-39 2 or less minor calculation errors and overall good Profitability and Risk Analysis Or Correct calculation of the financial ratios but not enough Profitability and Risk Analysis details provided. 10-23 2 or less major calculation errors and not enough Profitability and Risk Analysis provided. 0-9 Incorrect Risk Analysis, and major calculation errors of the financial ratios. 50 50 27-30 5-15 0-4 30 16-26

Answer rating: 100% (QA)

To complete the case assignment we will first prepare the forecasted financial statements for NMG Inc for the year 2024 based on the provided assumptions Then we will calculate the listed financial ra... View the full answer