Assignment 1: Chapter 2 Mini Case: Financial Statement and Cash Flow

Analysis

You are to write a six to ten (6-10) page report that responds to the following:

Part A:

Use the financial statements in the text to determine the following for Jaeden

Industries.

1. Calculate Jaedans free cash flow.

2. Calculate Jaedans liquidity.

3. Calculate Jaedans debt and profitability ratios.

4. Calculate Jaedans market ratios.

Part B:

Based on your analysis:

5. Highlight at least three financial strengths and three weaknesses Jaeden

Industries may have.

6. Provide recommendations along with rationale on how Jaedens

management may improve upon these weaknesses.

The format of the report is to be as follows:

o Typed, double spaced, Times New Roman font (size 12), one inch margins

on all sides, APA format.

o Use headers for each of the subjects being covered, followed by your

response.

o In addition to the six to ten (6-10) pages required, a title page is to be

included. The title page is to contain the title of the assignment, your name,

the instructors name, the course title, and the date.

NOTE: You will be graded on the quality of your answers, the logic/organization of the

report, your language skills, and your writing skills.

The assignment will be graded using the following rubric:

Balance Sheet as of Dec. 31, 2010 ASSETS Fixed Assets Less: Accumulated Depreciation LIABILITIES Accounts Payable Notes Payable Accruels $ 3,136,000.00 706,000.00 500,000.00 Total Current Liabilities 4,342,000.00 Long-Term Debts Cash Marketable Securities Inventory Accounts receivable Total Current Assets $ 3,689,000.00 1,836,000.00 4,118,000.00 5,423,000.00 15,066,000.00 3,046,000.00 14,811,000.00 (5,960,000.00) Preferred Stock Common Stock Paid-in-excess of capital Retained Earnings Net Fixed Assets 8,851,000.00 Total Shareholders equity 100,000.00 4,000,000.00 4,500,000.00 7,929,000.00 16,529,000.00 TOTAL ASSETS 23,917,000.00 Total Liabilities and shareho 23,917,000.00 Income Statement as of Dec. 31, 2010 Less: Less: Less: Less: Less: Sales COGS Gross Profit 42,000,000.00 26,460,000.00 15,540,000.00 Selling, General & Administrative expenses Depreciation Total Operating Expenses Operating Profit Interest Expense Earnings Before Income & Taxes (EBIT) Taxes Net Income Dividends Paid Retained Earnings 1,621,000.00 800,000.00 2,421,000.00 13,119,000.00 375,200.00 12,743,800.00 4,332,892.00 8,410,908.00 2,102,727.00 6,308,181.00 Retained earnings Statement as of Dec. 31, 2010 Opening Balance of Retained earnings Add Net Income Less Dividend Dividend Paid on Preferred Stock Dividend Paid on Common Stock Closing Balance of Retained earnings 1,628,819.00 8,410,908.00 8000 2,102,727.00 2,110,727.00 7,929,000.00 Free Cash Flow for Jaeden Industries Net Operating Profits After Taxes (NOPAT) Formula: NOPAT = EBIT (1 - T) NOPAT = NOPAT = 13,119,000.00 (0.66) $ 8,658,540.00 Operating Cash Flow (OCF) Formula: OCF = OCF = OCF = NOPAT + Depreciation 8658540 + $ 9,458,540.00 800000 Free Cash Flow (FCF) Formula: FCF = OCF - FA - (CA - AP - Accruals) FCF = FCF = FCF = 9,458,540.00 - 2,932,000.00 - (4,530,181.00 - 190,000.00 - 150,000.00) 2,336,359 $ 2,336,359.00 Current Ratio Quick Ratio Current Assets Current Liabilites Current Assets - Inventory Current Liabilities 15,066,000.00 4,342,000.00 Ans: 3.47 10,948,000.00 4,342,000.00 Ans: 2.52 Assets-to-Equity Ration (A/E) Debt-to-Equity (D/E) Total Assets Common Stock Equity Ans: Debt Ratio Total Liabilities Total Assets Long-Term Debt Stockholders' Equity 23,917,000.00 16,529,000.00 144.70% Times Interest Earned Earnings Before Interest & Taxes Interest Expense 13,119,000.00 375,200.00 Ans: 34.97 7,388,000.00 23,917,000.00 Ans: 3,046,000.00 16,529,000.00 30.89% Ans: 18.43% Gross Profit Margin Operating Profit Margin Gross Profit Sales Operating Profit Sales 15,540,000.00 42,000,000.00 Ans: 37.00% Net Profit Margin Earnings Available for common stockholders Sales 13,119,000.00 42,000,000.00 Ans: 8,410,908.00 42,000,000.00 31.24% Ans: Earnings Per Share Earnings Available for common stockholders Number of shares common stock outstanding Return on Total Assets Earnings Available for common stockholders Total Assets 8,410,908.00 1,000,000 Ans: $8.41 8,410,908.00 23,917,000.00 Ans: 35.17% 20.03% Market/Book Ratio Price/Earnings Ratio Market Price for share of common stock Earnings per share Ans: 56.82 8.4109 6.76 Market value per share of common stock Book value per share of common stock Ans: 56.82 16.42 3.46