Read the case Gift Card Capital: Credit and Cash Flow Evaluation By: Sybil Yang, Gordon Potter and
Question:
Read the case "Gift Card Capital: Credit and Cash Flow Evaluation By: Sybil Yang, Gordon Potter" and repond to the following questions
1. Create statement of flows for both companies for the past two years. For both companies, assume that all depreciation and amortization relate to net property and equipment. Other assets relate to cash from investing activities. Other long-term liabilities relate to cash from financing activities. i. Assume that the company made US$8,6291 and $5, 426 in capital expenditures in the prior year and the current year, respectively. ii. Assume that the company sold equipment worth $19,386 in the current year for $19,386.
iii. Remember, asset impairments are direct write-downs of plant and equipment or goodwill (i.e., non-cash expense). The treatment of impairments is similar to that of depreciation expense. Impairment charges by year and categories are as follows: Current Year Prior Year Net property and equipment $11,074 $12.018
Goodwill 34,920 37.092
Total $45,994 $49, 110
b) Hints and assumptions for Domingo Grill Inc. (Domingo Grill) are as follows:
i. Assume capital expenditures were made in both the current year and the prior year. All asset impairment charges relate to the property and equipment account. il. There were no disposals of property and equipment.
2. For both firms, create three years of common-size income statements down to operating income before impairment charges.
3. Strategically select a few two-year compounded annual growth rates (CAGRs) for the three-year period. Be prepared to discuss your reasoning as to why the CARs you chose would best inform Merck's credit decision.
4. For both firms, calculate and provide asset-utilization and financing-to-risk ratios using ending balances; this approach will allow for a three-year trend for each firm. Provide only those ratios that will best help you to formulate a judgment.'
5. Based on your analysis, should Merck offer a cash advance to one, both, or neither of the firms? If Merck chooses to extend a cash advance, how large should that advance be? What specific terms or conditions should be associated with any cash advance?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill