Financial
Statement Analysis
MG
770

Final Exam
Fall 2014

Part 2 – Problem
Solving
.gif”>All
Answers to be submitted on Excel Answer Sheet
(show work or use formulas when
appropriate)

Use
the following information about XYZ Plumbing (FY=12/31), a public company with
the most recent

closing
stock price of $5.00, to answer the following three problems

–

——————————————————————————————————

Income
Statement

2012

2013

Revenue

$

10,000,000

$

12,000,000

CGS

4,000,000

4,800,000

Gross
Profit

$

6,000,000

$

7,200,000

SG&A

1,800,000

2,000,000

R&D

1,000,000

1,000,000

Deprec &
Amort

500,000

550,000

Total Op.
Expense

3,300,000

3,550,000

Operating
Profit

$

2,700,000

$

3,650,000

Interest cost

520,000

600,000

Interest income

90,000

110,000

Pre-Tax

$

2,270,000

$

3,160,000

Tax (35% rate)

794,500

1,106,000

Net Income

$

1,475,500

$

2,054,000

EPS – Basic

$

0.15

$

0.21

Average Shares
Outstanding

10,000,000

10,000,000

Balance Sheet

2012

2013

2013

2013

ASSETS

LIABILITIES

Cash

3,000,000

4,154,000

Accounts
Payable

500,000

500,000

A/R

1,000,000

1,500,000

Notes Payable

1,500,000

1,000,000

Inventory

2,000,000

2,300,000

Current portion
of LTD

1,000,000

1,000,000

Pre-paid
expenses

500,000

670,000

Accrued
Liabilities

500,000

520,000

Total Current
Assets

6,500,000

8,624,000

Total Current
Liabilities

3,500,000

3,020,000

Building and
Improvements

15,000,000

15,000,000

Long-Term Debt

12,000,000

14,000,000

Equipment

5,000,000

7,000,000

20,000,000

22,000,000

Stockholder’s
Equity

Common Stock at
Par

100,000

100,000

Depreciation

500,000

1,050,000

Paid in Capital

9,900,000

9,900,000

Net PP&E

19,500,000

20,950,000

Retained
Earnings

500,000

2,554,000

Total
Stockholder’s Equity

10,500,000

12,554,000

Total
Assets

26,000,000

29,574,000

Total
Liabilities + Equity

26,000,000

29,574,000

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Financial
Statements – Final Exam Fall 2014 – 1 –

1.
(26 Points)

Complete
the following cash Flow Statement for XYZ Plumbing for 2013

Statement of Cash
Flows

2013

.jpg”>
Net Income

Adjustments
.jpg”>
Depreciation and amortization

Cash Provided by Operating Assets
and Liabilities
.jpg”>
Accounts Receivable

Inventories

Pre-paid expenses

Accounts payable

Accrued liabilities

Net Cash provided (used) by
operating activities

Cash Provided from Investing
Activities
.jpg”>
Additions to property, plant and
equipment

Net Cash provided (used) by
investing activities

Cash Provided from Financing
Activities
.jpg”>
Additions to long term borrowing

Addition to short term borrowing

Net Cash provided (used) by
financing activities
.jpg”>
Net Cash Flow

2. (
6 Points)

Calculate the
following ratios for 2013:

2013
.jpg”>
Current
Ratio

Accounts
Receivable turnover Inventory turnover

Revenue
to Cash Return on Assets Return on Equity
.jpg”>

Financial
Statements – Final Exam Fall 2014 – 2 –

3.
(18 Points,1 point for each correct box except diluted shares –
6 points)
3.)
Fill in the projections for XYZ for 2003, based on the following assumptions:

1.
Revenue grows by 20% between 2013 and
2014.
2.
Gross Margins remain at
2013 levels.
3.
SG&A improves by 1% (as a % of
revenue)
4.
R&D increases by 20%.
5.
Depreciation and Amortization costs do
not change between 2013 and 2014.
6.
Interest costs and expenses are given in
the table.
7.
The tax rate remains constant.
8.
Options and Warrants are listed in the
following table:

Options

Amount

Exercise Price

Public
Warrants

Amount

Exercise Price

Officers and Directors

2,000,000

$2.00

Shareholders

4,000,000

$3.00

2014E
.jpg”>
Revenue
CGS

Gross Profit
.jpg”>
SG&A

R&D

Deprec &
Amort

Total Op.
Expense
.jpg”>
Operating Profit

Interest cost

Interest income
.jpg”>
Pre-Tax

Tax (35% rate)

Net Income
.jpg”>
EPS – Basic

EPS – Diluted
.jpg”>

Financial
Statements – Final Exam Fall 2014 – 3 –
Financial
Statement AnalysisMG
770Final Exam
Fall 2014Part 2 – Problem
Solving .gif”>All
Answers to be submitted on Excel Answer Sheet(show work or use formulas when
appropriate)Use
the following information about XYZ Plumbing (FY=12/31), a public company with
the most recentclosing
stock price of $5.00, to answer the following three problems——————————————————————————————————-Income
Statement20122013Revenue$10,000,000$12,000,000CGS4,000,0004,800,000Gross
Profit$6,000,000$7,200,000SG&A1,800,0002,000,000R&D1,000,0001,000,000Deprec &
Amort500,000550,000Total Op.
Expense3,300,0003,550,000Operating
Profit$2,700,000$3,650,000Interest cost520,000600,000Interest income90,000110,000Pre-Tax$2,270,000$3,160,000Tax (35% rate)794,5001,106,000Net Income$1,475,500$2,054,000EPS – Basic$0.15$0.21Average Shares
Outstanding10,000,00010,000,000Balance Sheet2012201320132013ASSETSLIABILITIESCash3,000,0004,154,000Accounts
Payable500,000500,000A/R1,000,0001,500,000Notes Payable1,500,0001,000,000Inventory2,000,0002,300,000Current portion
of LTD1,000,0001,000,000Pre-paid
expenses500,000670,000Accrued
Liabilities500,000520,000Total Current
Assets6,500,0008,624,000Total Current
Liabilities3,500,0003,020,000Building and
Improvements15,000,00015,000,000Long-Term Debt12,000,00014,000,000Equipment5,000,0007,000,00020,000,00022,000,000Stockholder’s
EquityCommon Stock at
Par100,000100,000Depreciation500,0001,050,000Paid in Capital9,900,0009,900,000Net PP&E19,500,00020,950,000Retained
Earnings500,0002,554,000Total
Stockholder’s Equity10,500,00012,554,000Total
Assets26,000,00029,574,000Total
Liabilities + Equity26,000,00029,574,000.jpg”>.jpg”>Financial
Statements – Final Exam Fall 2014 – 1 -1.
(26 Points)Complete
the following cash Flow Statement for XYZ Plumbing for 2013Statement of Cash
Flows2013.jpg”>Net IncomeAdjustments.jpg”>Depreciation and amortizationCash Provided by Operating Assets
and Liabilities.jpg”>Accounts ReceivableInventoriesPre-paid expensesAccounts payableAccrued liabilitiesNet Cash provided (used) by
operating activitiesCash Provided from Investing
Activities.jpg”>Additions to property, plant and
equipmentNet Cash provided (used) by
investing activitiesCash Provided from Financing
Activities.jpg”>Additions to long term borrowingAddition to short term borrowingNet Cash provided (used) by
financing activities.jpg”>Net Cash Flow2. (
6 Points)Calculate the
following ratios for 2013:2013.jpg”>Current
RatioAccounts
Receivable turnover Inventory turnoverRevenue
to Cash Return on Assets Return on Equity.jpg”>Financial
Statements – Final Exam Fall 2014 – 2 -3.
(18 Points,1 point for each correct box except diluted shares –
6 points)3.)
Fill in the projections for XYZ for 2003, based on the following assumptions:1.
Revenue grows by 20% between 2013 and
2014. 2.
Gross Margins remain at
2013 levels. 3.
SG&A improves by 1% (as a % of
revenue) 4.
R&D increases by 20%. 5.
Depreciation and Amortization costs do
not change between 2013 and 2014. 6.
Interest costs and expenses are given in
the table. 7.
The tax rate remains constant. 8.
Options and Warrants are listed in the
following table: OptionsAmountExercise PricePublic
WarrantsAmountExercise PriceOfficers and Directors2,000,000$2.00Shareholders4,000,000$3.002014E.jpg”>Revenue
CGSGross Profit.jpg”>SG&AR&DDeprec &
AmortTotal Op.
Expense.jpg”>Operating ProfitInterest costInterest income.jpg”>Pre-TaxTax (35% rate)Net Income.jpg”>EPS – BasicEPS – Diluted.jpg”>Financial
Statements – Final Exam Fall 2014 – 3 –