Below are financial statements for Sentec Inc., a distributor of electrical fixtures, for 2008, 2009, and 2010.

a. Compute Sentec Inc.’s working capital requirement (WCR) on December 31, 2008, 2009, and 2010.

b. Prepare Sentec Inc.’s managerial balance sheets on December 31, 2008, 2009, and 2010.

c. Compute Sentec Inc.’s net long-term financing (NLF) and net short-term financing (NSF) on December 31, 2008, 2009, and 2010. Comment on the change in Sentec Inc.’s financing policy. Has it become more conservative? Aggressive? What caused this change?

d. In 2010, firms in the same business sector as Sentec Inc. had an average collection period of thirty days, average payment period of thirty-three days, and inventory turnover of eight days. Suppose that Sentec Inc. had managed its operating cycle like the average firm in the sector. On December 31, 2010, what would its WCR have been? Its managerial balance sheet, NLF, and NSF?

What would have been the effect on its financing strategy?

Income Statements (in thousands) 2008 2009 2010 Net sales Cost of goods sold Selling, general, and administrative expenses Depreciation expense Earnings before interest and tax Net interest expense Earnings before tax Income tax expensoe Earnings after tax Dividends $ 22,100 17,600 3,750 100 650 110 540 220 S 320 S 180 S24,300 19,300 4,000 100 900 130 770 310 460 S 200 $31,600 25,100 5,000 150 1,350 260 1,090 430 S660 200 Balance Sheets (in thousands) December 31, 2008 December 31, 2009 350 3,100 3,200 December 31, 2010 Cash Accounts receivable Inventories Prepaid expenses Net fixed assets Total assets Short-term debt Accounts payable Accrued expenses Long-term debt Owners equity Total liabilities and owners' equity $ 600 2,730 2,800 0 1,200 S 7,330 300 1,400 200 1,300 4,130 $ 7,330 S 300 4,200 4,300 1,300 S7,950 500 1,600 260 1,200 4,390 S7,950 1,450 $10,250 1,900 2,050 350 1,100 4,850 $10,250