Description
Complete the following problems from Chapters 3 and 4 in Principles of Managerial Finance:
- Financial Statement and Ratio Analysis: P3-5; P3-12; P3-13; P3-17; P3-18; P3-21; P3-24; P3-26
- Cash Flow and Financial Planning: P4-9; P4-10
Use Excel and the Chapter 4 Excel resource (if needed). There is no resource for Chapter 3.
K.
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园
d.
What results, overall, would you hope your recommendations would achieve:
Why might your recommendations not be effective?
P3–18 Debt analysis Springfield Bank is evaluating Creek Enterprises, which has requested
a $4,000,000 loan, to assess the firm’s financial leverage and financial risk. On the
basis of the debt ratios for Creek, along with the industry averages (see the top of
the next page) and Creek’s recent financial statements (following), evaluate and
recommend appropriate action on the loan request.
Creek Enterprises Income Statement for the Year Ended December 31, 2015
Sales revenue
$30,000,000
Less: Cost of goods sold
21,000,000
Gross profits
$ 9,000,000
Less: Operating expenses
Selling expense
$ 3,000,000
General and administrative expenses
1,800,000
Lease expense
200,000
Depreciation expense
1,000,000
Total operating expense
$ 6,000,000
Operating profits
$ 3,000,000
Less: Interest expense
1,000,000
Net profits before taxes
$ 2,000,000
Less: Taxes (rate = 40%)
800,000
Net profits after taxes
$ 1,200,000
Less: Preferred stock dividends
100,0000
Earnings available for common stockholders
$ 1,100,000
ance, Fourteenth Edition, by Lawrence J. Gitman and Chad J. Zutter. Published by Prentice Hall. Copyright © 2015 by Pearson Education, Inc.
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Personal Finance Problem
P4-10 Preparation of cash budget Sam and Suzy Sizeman need to prepare a cash budget
for the last quarter of 2016 to make sure they can cover their expenditures during
the period. Sam and Suzy have been preparing budgets for the past several years and
have been able to establish specific percentages for most of their cash outflows.
These percentages are based on their take-home pay (that is, monthly utilities nor-
mally run 5% of monthly take-home pay). The information in the following table
can be used to create their fourth-quarter budget for 2016.
Income
$4,900
Monthly take-home pay
Expenses
Housing
Utilities
Food
Transportation
Medical/dental
Clothing for October and November
Clothing for December
Property taxes (November only)
Appliances
Personal care
Entertainment for October and November
Entertainment for December
Savings
Other
Excess cash
30%
5%
10%
7%
.5%
3%
$440
11.5%
1%
2%
6%
$1,500
7.5%
5%
4.5%
a. Prepare a quarterly cash budget for Sam and Suzy covering the months October
through December 2016.
b. Are there individual months that incur a deficit?
c. What is the cumulative cash surplus or deficit by the end of December 2016?
P4-11
Cash budget: Advanced The actual sales and purchases for Xenocore, Inc., for Sep-
tember and October 2015 along with its forecast sales and purchases for the neriod
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Personal Finance Problem
P4-10 Preparation of cash budget Sam and Suzy Sizeman need to prepare a cash budget
for the last quarter of 2016 to make sure they can cover their expenditures during
the period. Sam and Suzy have been preparing budgets for the past several years and
have been able to establish specific percentages for most of their cash outflows.
These percentages are based on their take-home pay (that is, monthly utilities nor-
mally run 5% of monthly take-home pay). The information in the following table
can be used to create their fourth-quarter budget for 2016.
Income
$4,900
Monthly take-home pay
Expenses
Housing
Utilities
Food
Transportation
Medical/dental
Clothing for October and November
Clothing for December
Property taxes (November only)
Appliances
Personal care
Entertainment for October and November
Entertainment for December
Savings
Other
Excess cash
30%
5%
10%
7%
.5%
3%
$440
11.5%
1%
2%
6%
$1,500
7.5%
5%
4.5%
a. Prepare a quarterly cash budget for Sam and Suzy covering the months October
through December 2016.
b. Are there individual months that incur a deficit?
c. What is the cumulative cash surplus or deficit by the end of December 2016?
P4-11
Cash budget: Advanced The actual sales and purchases for Xenocore, Inc., for Sep-
tember and October 2015 along with its forecast sales and purchases for the neriod
LG 6
P3-24 Financial statement analysis The financial statements of Zach Industries for the
year
ended December 31, 2015, follow.
Zach Industries Income Statement
for the Year Ended December 31, 2015
$160,000
106,000
$ 54,000
Sales revenue
Less: Cost of goods sold
Gross profits
Less: Operating expenses
Selling expense
General and administrative expenses
Lease expense
Depreciation expense
Total operating expense
Operating profits
Less: Interest expense
Net profits before taxes
Less: Taxes
Net profits after taxes
$ 16,000
10,000
1,000
10,000
$ 37,000
$ 17,000
6,100
$ 10,900
4,360
$ 6.540
al Finance, Fourteenth Edition, by Lawrence J. Gitman and Chad J. Zutter. Published by Prentice Hall. Copyright © 2015 by Pearson Education, Inc.
R12 Financial Tools
Zach Industries Balance Sheet December 31, 2015
Assets
Cash
Marketable securities
Accounts receivable
Inventories
Total current assets
Land
Buildings and equipment
Less: Accumulated depreciation
Net fixed assets
Total assets
$ 500
1,000
25,000
45,500
$ 72,000
$ 26,000
90,000
38,000
$ 78,000
$150,000
Liabilities and Stockholders’ Equity
Accounts payable
Notes payable
Total current liabilities
Long-term debt
Common stock
Retained earnings
Total liabilities and stockholders’ equity
22,000
47,000
$ 69,000
22,950
31,500
26,550
$ 150,000
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CHAPTER 3 Financial Statements and Ratio Analysis
107
P3-21 The relationship between financial leverage and profitability Pelican Paper, Inc.,
and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some fi-
nancial statement values for each company follow. Use them in a ratio analysis that
compares the firms’ financial leverage and profitability.
Item
Total assets
Total equity (all common)
Total debt
Annual interest
Total sales
Pelican Paper, Inc. Timberland Forest, Inc.
$10,000,000 $10,000,000
9,000,000
5,000,000
1,000,000
5,000,000
100,000
500,000
25,000,000
25,000,000
6,250,000
6,250,000
3,690,000
3,450,000
EBIT
Earnings available for
common stockholders
a. Calculate the following debt and coverage ratios for the two companies. Discuss
their financial risk and ability to cover the costs in relation to each other.
1. Debt ratio
2. Times interest earned ratio
b. Calculate the following profitability ratios for the two companies. Discuss their
profitability relative to one another.
1. Operating profit margin
2. Net profit margin
3. Return on total assets
4. Return on common equity
c. In what way has the larger debt of Timberland Forest made it more profitable
than Pelican Paper? What are the risks that Timberland’s investors undertake
when they choose to purchase its stock instead of Pelican’s?
T
P3-22 Ratio proficiency McDougal Printing, Inc., had sales totaling $40,000,000 in fiscal year
2015. Some ratios for the company are listed below. Use this information to determine
the dollar values of various income statement and balance sheet accounts as requested.
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cob_principles_of_managerial_finance_14e(2).pdf (SECURED)
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151
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+
100%
园
d.
What results, overall, would you hope your recommendations would achieve:
Why might your recommendations not be effective?
P3–18 Debt analysis Springfield Bank is evaluating Creek Enterprises, which has requested
a $4,000,000 loan, to assess the firm’s financial leverage and financial risk. On the
basis of the debt ratios for Creek, along with the industry averages (see the top of
the next page) and Creek’s recent financial statements (following), evaluate and
recommend appropriate action on the loan request.
Creek Enterprises Income Statement for the Year Ended December 31, 2015
Sales revenue
$30,000,000
Less: Cost of goods sold
21,000,000
Gross profits
$ 9,000,000
Less: Operating expenses
Selling expense
$ 3,000,000
General and administrative expenses
1,800,000
Lease expense
200,000
Depreciation expense
1,000,000
Total operating expense
$ 6,000,000
Operating profits
$ 3,000,000
Less: Interest expense
1,000,000
Net profits before taxes
$ 2,000,000
Less: Taxes (rate = 40%)
800,000
Net profits after taxes
$ 1,200,000
Less: Preferred stock dividends
100,0000
Earnings available for common stockholders
$ 1,100,000
ance, Fourteenth Edition, by Lawrence J. Gitman and Chad J. Zutter. Published by Prentice Hall. Copyright © 2015 by Pearson Education, Inc.
iew
Window
) 94%
Help
D dish 1.11 GB
cob_principles_of_managerial_finance_14e(2).pdf (SECURED)
20460702-1.pdf
20460702-2.pdf
S_of… X
198
(199 of 931)
+
100%
je
E
Personal Finance Problem
P4-10 Preparation of cash budget Sam and Suzy Sizeman need to prepare a cash budget
for the last quarter of 2016 to make sure they can cover their expenditures during
the period. Sam and Suzy have been preparing budgets for the past several years and
have been able to establish specific percentages for most of their cash outflows.
These percentages are based on their take-home pay (that is, monthly utilities nor-
mally run 5% of monthly take-home pay). The information in the following table
can be used to create their fourth-quarter budget for 2016.
Income
$4,900
Monthly take-home pay
Expenses
Housing
Utilities
Food
Transportation
Medical/dental
Clothing for October and November
Clothing for December
Property taxes (November only)
Appliances
Personal care
Entertainment for October and November
Entertainment for December
Savings
Other
Excess cash
30%
5%
10%
7%
.5%
3%
$440
11.5%
1%
2%
6%
$1,500
7.5%
5%
4.5%
a. Prepare a quarterly cash budget for Sam and Suzy covering the months October
through December 2016.
b. Are there individual months that incur a deficit?
c. What is the cumulative cash surplus or deficit by the end of December 2016?
P4-11
Cash budget: Advanced The actual sales and purchases for Xenocore, Inc., for Sep-
tember and October 2015 along with its forecast sales and purchases for the neriod
iew
Window
) 94%
Help
D dish 1.11 GB
cob_principles_of_managerial_finance_14e(2).pdf (SECURED)
20460702-1.pdf
20460702-2.pdf
S_of… X
198
(199 of 931)
+
100%
je
E
Personal Finance Problem
P4-10 Preparation of cash budget Sam and Suzy Sizeman need to prepare a cash budget
for the last quarter of 2016 to make sure they can cover their expenditures during
the period. Sam and Suzy have been preparing budgets for the past several years and
have been able to establish specific percentages for most of their cash outflows.
These percentages are based on their take-home pay (that is, monthly utilities nor-
mally run 5% of monthly take-home pay). The information in the following table
can be used to create their fourth-quarter budget for 2016.
Income
$4,900
Monthly take-home pay
Expenses
Housing
Utilities
Food
Transportation
Medical/dental
Clothing for October and November
Clothing for December
Property taxes (November only)
Appliances
Personal care
Entertainment for October and November
Entertainment for December
Savings
Other
Excess cash
30%
5%
10%
7%
.5%
3%
$440
11.5%
1%
2%
6%
$1,500
7.5%
5%
4.5%
a. Prepare a quarterly cash budget for Sam and Suzy covering the months October
through December 2016.
b. Are there individual months that incur a deficit?
c. What is the cumulative cash surplus or deficit by the end of December 2016?
P4-11
Cash budget: Advanced The actual sales and purchases for Xenocore, Inc., for Sep-
tember and October 2015 along with its forecast sales and purchases for the neriod
LG 6
P3-24 Financial statement analysis The financial statements of Zach Industries for the
year
ended December 31, 2015, follow.
Zach Industries Income Statement
for the Year Ended December 31, 2015
$160,000
106,000
$ 54,000
Sales revenue
Less: Cost of goods sold
Gross profits
Less: Operating expenses
Selling expense
General and administrative expenses
Lease expense
Depreciation expense
Total operating expense
Operating profits
Less: Interest expense
Net profits before taxes
Less: Taxes
Net profits after taxes
$ 16,000
10,000
1,000
10,000
$ 37,000
$ 17,000
6,100
$ 10,900
4,360
$ 6.540
al Finance, Fourteenth Edition, by Lawrence J. Gitman and Chad J. Zutter. Published by Prentice Hall. Copyright © 2015 by Pearson Education, Inc.
R12 Financial Tools
Zach Industries Balance Sheet December 31, 2015
Assets
Cash
Marketable securities
Accounts receivable
Inventories
Total current assets
Land
Buildings and equipment
Less: Accumulated depreciation
Net fixed assets
Total assets
$ 500
1,000
25,000
45,500
$ 72,000
$ 26,000
90,000
38,000
$ 78,000
$150,000
Liabilities and Stockholders’ Equity
Accounts payable
Notes payable
Total current liabilities
Long-term debt
Common stock
Retained earnings
Total liabilities and stockholders’ equity
22,000
47,000
$ 69,000
22,950
31,500
26,550
$ 150,000
5
mo
sto
Window
FOF
Help
D dish 803.21 MB
cob_principles_of_managerial_finance_14e(2).pdf (SECURED)
X
20460702-1.pdf
20460702-2.pdf
153
(154 of 931)
+
100%
CHAPTER 3 Financial Statements and Ratio Analysis
107
P3-21 The relationship between financial leverage and profitability Pelican Paper, Inc.,
and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some fi-
nancial statement values for each company follow. Use them in a ratio analysis that
compares the firms’ financial leverage and profitability.
Item
Total assets
Total equity (all common)
Total debt
Annual interest
Total sales
Pelican Paper, Inc. Timberland Forest, Inc.
$10,000,000 $10,000,000
9,000,000
5,000,000
1,000,000
5,000,000
100,000
500,000
25,000,000
25,000,000
6,250,000
6,250,000
3,690,000
3,450,000
EBIT
Earnings available for
common stockholders
a. Calculate the following debt and coverage ratios for the two companies. Discuss
their financial risk and ability to cover the costs in relation to each other.
1. Debt ratio
2. Times interest earned ratio
b. Calculate the following profitability ratios for the two companies. Discuss their
profitability relative to one another.
1. Operating profit margin
2. Net profit margin
3. Return on total assets
4. Return on common equity
c. In what way has the larger debt of Timberland Forest made it more profitable
than Pelican Paper? What are the risks that Timberland’s investors undertake
when they choose to purchase its stock instead of Pelican’s?
T
P3-22 Ratio proficiency McDougal Printing, Inc., had sales totaling $40,000,000 in fiscal year
2015. Some ratios for the company are listed below. Use this information to determine
the dollar values of various income statement and balance sheet accounts as requested.
BE
А Ac
Bu
Purchase answer to see full
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