Case 1: Consider the Following Case: Jenny Cochran, a recent graduate of the University of Ottawa...

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Case 1: Consider the Following Case: Jenny Cochran, a recent graduate of the University of Ottawa with four years of banking experience, was recently brought in as assistant to the chairman of the board of Computron Industries, a manufacturer of computer components. The company doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. Computron's results were not satisfactory, to put it mildly. Its board of directors, which consisted of its president and vice-president plus its major stockholders (who were all local business people), was most upset when directors learned how the expansion was going. Suppliers were being paid late and were unhappy, and the bank was complaining about the deteriorating situation and threatening to cut off credit. As a result, Al Watkins, Computron's president, was informed that changes would have to be made, and quickly, or he would be fired. Also, at the board's insistence Donna Jenny Cochran was brought in and given the job of assistant to Gary Meissner, a retired banker who was Computron's chairman and largest stockholder. Gary agreed to give up a few of his golfing days and to help nurse the company back to health, with Meissner's help. Cochran began by gathering financial statements and other data. Assume that you are Cochran's assistant, and you must help her answer the following questions for Gary. Cochran began by gathering financial statements and other data that are enclosed herewith. Now answer the following questions based on available information in the tables below. [Answer the questions for 2015, however, you may have to calculate 2014's values to answer some of the questions.] 1. What is Computron's 2015's operating current assets? 2. What is 2015's operating current liabilities? 3. How much net operating working capital does Computron have? 4. How much total net operating capital does Computron have? 5. What is Computron's net operating profit after taxes (NOPAT)? 6. What is Computron's free cash flow (FCF)? Balance Sheets 2014 2015 Assets Cash and equivalents Short-term investments $9,000 $7,282 $48,600 $20,000 Accounts receivable $351,200 $632,160 Inventories $715,200 $1,287,360 Total current assets $1,124,000 $1,946,802 Gross fixed assets $491,000 $1,202,950 Less: Accumulated depreciation $146,200 $263,160 Net plant and equipment $344,800 $939,790 Total assets $1,468,800 $2,886,592 Liabilities and equity Accounts payable Notes payable Accruals Total current liabilities Long-term bonds $145,600 $324,000 $200,000 $720,000 $136,000 $284,960 $481,600 $1,328,960 $323,432 $1,000,000 Common Stock $460,000 $460,000 Retained Earnings $203,768 $97,632 Total Equity $663,768 $557,632 Total Liabilites and Equity $1,468,800 $2,886,592 Income Statement INCOME STATEMENT Net sales Cost of Goods Sold 2014 2015 $3,432,000 $5,834,400 $2,864,000 $4,980,000 Other Expenses $340,000 $720,000 Depreciation $18,900 $116,960 Total Operating Costs $3,222,900 $5,816,960 Earnings before interest and taxes (EBIT) $209,100 $17,440 Less interest $62,500 $176,000 Earnings before taxes (EBT) $146,600 -$158,560 Taxes (40%) $58,640 -$63,424 Net Income $87,960 -$95,136 Other Data Stock Price Shares outstanding EPS DPS Tax Rate Statement of Cash Flows 2014 2015 $8.50 100,000 $0.88 $6.00 100,000 $(0.95) $0.22 $0.11 40% 40% 2015 Operating Activities Net Income before preferred dividends Noncash adjustments Depreciation and amortization Due to changes in working capital Change in accounts receivable ($95,136) $116,960 ($280,960) Change in inventories ($572,160) Change in accounts payable $178,400 Change in accruals $148,960 Net cash provided by operating activities ($503,936) Investing activities Cash used to acquire fixed assets ($711,950) Change in short-term investments $28,600 Net cash provided by investing activities ($683,350) Financing Activities Change in notes payable Change in long-term debt Payment of cash dividends Net cash provided by financing activities Net change in cash and equivilents Cash and securities at beginning of the year Cash and securities at end of the year $520,000 $676,568 ($11,000) $1,185,568 ($1,718) $9,000 $7,282 Case 1: Consider the Following Case: Jenny Cochran, a recent graduate of the University of Ottawa with four years of banking experience, was recently brought in as assistant to the chairman of the board of Computron Industries, a manufacturer of computer components. The company doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. Computron's results were not satisfactory, to put it mildly. Its board of directors, which consisted of its president and vice-president plus its major stockholders (who were all local business people), was most upset when directors learned how the expansion was going. Suppliers were being paid late and were unhappy, and the bank was complaining about the deteriorating situation and threatening to cut off credit. As a result, Al Watkins, Computron's president, was informed that changes would have to be made, and quickly, or he would be fired. Also, at the board's insistence Donna Jenny Cochran was brought in and given the job of assistant to Gary Meissner, a retired banker who was Computron's chairman and largest stockholder. Gary agreed to give up a few of his golfing days and to help nurse the company back to health, with Meissner's help. Cochran began by gathering financial statements and other data. Assume that you are Cochran's assistant, and you must help her answer the following questions for Gary. Cochran began by gathering financial statements and other data that are enclosed herewith. Now answer the following questions based on available information in the tables below. [Answer the questions for 2015, however, you may have to calculate 2014's values to answer some of the questions.] 1. What is Computron's 2015's operating current assets? 2. What is 2015's operating current liabilities? 3. How much net operating working capital does Computron have? 4. How much total net operating capital does Computron have? 5. What is Computron's net operating profit after taxes (NOPAT)? 6. What is Computron's free cash flow (FCF)? Balance Sheets 2014 2015 Assets Cash and equivalents Short-term investments $9,000 $7,282 $48,600 $20,000 Accounts receivable $351,200 $632,160 Inventories $715,200 $1,287,360 Total current assets $1,124,000 $1,946,802 Gross fixed assets $491,000 $1,202,950 Less: Accumulated depreciation $146,200 $263,160 Net plant and equipment $344,800 $939,790 Total assets $1,468,800 $2,886,592 Liabilities and equity Accounts payable Notes payable Accruals Total current liabilities Long-term bonds $145,600 $324,000 $200,000 $720,000 $136,000 $284,960 $481,600 $1,328,960 $323,432 $1,000,000 Common Stock $460,000 $460,000 Retained Earnings $203,768 $97,632 Total Equity $663,768 $557,632 Total Liabilites and Equity $1,468,800 $2,886,592 Income Statement INCOME STATEMENT Net sales Cost of Goods Sold 2014 2015 $3,432,000 $5,834,400 $2,864,000 $4,980,000 Other Expenses $340,000 $720,000 Depreciation $18,900 $116,960 Total Operating Costs $3,222,900 $5,816,960 Earnings before interest and taxes (EBIT) $209,100 $17,440 Less interest $62,500 $176,000 Earnings before taxes (EBT) $146,600 -$158,560 Taxes (40%) $58,640 -$63,424 Net Income $87,960 -$95,136 Other Data Stock Price Shares outstanding EPS DPS Tax Rate Statement of Cash Flows 2014 2015 $8.50 100,000 $0.88 $6.00 100,000 $(0.95) $0.22 $0.11 40% 40% 2015 Operating Activities Net Income before preferred dividends Noncash adjustments Depreciation and amortization Due to changes in working capital Change in accounts receivable ($95,136) $116,960 ($280,960) Change in inventories ($572,160) Change in accounts payable $178,400 Change in accruals $148,960 Net cash provided by operating activities ($503,936) Investing activities Cash used to acquire fixed assets ($711,950) Change in short-term investments $28,600 Net cash provided by investing activities ($683,350) Financing Activities Change in notes payable Change in long-term debt Payment of cash dividends Net cash provided by financing activities Net change in cash and equivilents Cash and securities at beginning of the year Cash and securities at end of the year $520,000 $676,568 ($11,000) $1,185,568 ($1,718) $9,000 $7,282