1. Part A: Using the data in exhibits C5.1 and C5.2, discuss how Quaker Cracker’s results compare to its industry. You will need to prepare a pro forma income statement (using the table below) before proceeding. Income Statement (in millions) Sales Cost of goods sold Gross profit Depreciation expense Advertising and selling expenses Profits before taxes Income Taxes Net income Current (times) Quick (times) Debt (%) Average collection period (days) Total asset turnover (times) Return on Equity (%)

Part B: After entering the calculations in the table above, discuss specific metrics that can be used to analyze working capital performance. Type your two- to three-sentence response below.

2. Part A: Show changes to the 2012 pro forma balance sheet assuming the company borrows the necessary funds for the capital improvements at an interest rate of 7 percent. Ignore depreciation on the new equipment. Enter your calculations in the table provided below. Assets Calculations Liabilities and Owners’ Equity Calculations Cash and Marketable Securities Notes payable Accounts Receivable Accounts payable Inventory Accrued expenses Current Assets Current liabilities Gross Fixed Assets Long-term debt Accumulated Depreciation Common Stock ($10 par) Net fixed assets Retained earnings Total assets Total liabilities and owners’ equity

Part B: Does this cause any significant change in the financials? Type your two- to three-sentence response below.

3. Play the role of a financial analyst and explain your recommended course of action. Type your three- to five-sentence response below.

4. The Cynsky family controls the company through its ownership of one half of the outstanding stock, with outsiders owning the balance. Should this influence McCabe’s presentation of her recommendations? What arguments can you make in support of and against McCabe’s position? Type your four- to five-sentence response below.

5. Why was the information provided in the second paragraph about competitive companies in the fancy food industry? Type your two- to four-sentence response below.

EXHIBIT C5.1 Ratios for the Fancy Foods Industry
Price-earnings ratio (times)	16.0
Current ratio (times)	1.8
Quick ratio (times)	0.6
Total debt ratio (%)	53.0
Total asset turnover ratio (times)	1.5
Return on equity (%)	8.0
Return on sales (%)	2.5
Average collection period (days)	27.0

EXHIBIT C5.2 Quacker Cracker Balance Sheet for the 2012 ($000s) (Prepared before any financing decisions have been made
Assets		Liabilities and Equity
Cash and marketable securities	$16,000	Notes payable	$0
Accounts receivable	16,000	Accounts payable	19,500
Inventory	23,000	Accrued expenses	6,000
Current assets	55,000	Current liabilities	25,500
Gross fixed assets	52,000	Long-term debt	0
Accumulated depreciation	-12,000	Common stock ($10 par)*	40,000
Net fixed assets	40,000	Retained earnings	29,500
Total assets	95,000	Total liabilities and equity	$95,000

*Not publicly traded; the last private sale was at $50 a share

Table for income statement below....

Assets	Calculations	Liabilities and Owners’ Equity	Calculations
Cash and Marketable Securities	Notes payable
Accounts Receivable	Accounts payable
Inventory	Accrued expenses
Current Assets	Current liabilities
Gross Fixed Assets	Long-term debt
Accumulated Depreciation	Common Stock ($10 par)
Net fixed assets	Retained earnings
Total assets	Total liabilities and owners’ equity

Answer rating: 100% (QA)

1 Part A Particulars Amt in Million Sales 23000 Cost of goods sold 18000 Gross profit 5000 Depreciation Expense 500 Adv selling exp 1500 Profit Before ... View the full answer