# Finanacial Statement Analysis

Please see the attached file.

3-11 (Income and Cash Flow Analysis) on page 116 of your course textbook.

The Berndt Corporation expects to have sales of $ 12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be $ 1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndts federal- plus- state tax rate is 40%. Berndt has no debt.

a. Set up an income statement. What is Berndts expected net cash flow?

b. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow?

c. Now suppose that Congress, instead of doubling Berndts depreciation, reduced it by 50%. How would profit and net cash flow be affected?

d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why?

3-10 (Cash Income Flows) on page 116 of your course textbook.

The Moore Corporation has operating income ( EBIT) of $ 750,000. The company's depreciation expense is $ 200,000. Moore is 100% equity financed, and it faces a 40% tax rate. What is the company's net income? What is its net cash flow?

4-1 (Days Sales Outstanding) and 4.2 (Debt Ratio) on page 147 of your course textbook.

4-1: Greene Sisters has a DSO of 20 days. The company's average daily sales are $ 20,000. What is the level of its accounts receivable? Assume there are 365 days in a year.

4.2: Vigo Vacations has an equity multiplier of 2.5. The company's assets are financed with some combination of long- term debt and common equity. What is the company's debt ratio?

Complete practice problem 4.6 (Du Pont Analysis) on page 147 of your course textbook.

Donaldson & Son has an ROA of 10%, a 2% profit margin, and a return on equity equal to 15%. What is the company's total assets turnover? What is the firm's equity multiplier?

Complete practice problems 4-10 (Times- Interest- Earned Ratio) and 4-11 (Balance Sheet Analysis) on page 148 of your course textbook.

4.10: The Manor Corporation has $ 500,000 of debt outstanding, and it pays an interest rate of 10% annually: Manors annual sales are $ 2 million, its average tax rate is 30%, and its net profit margin on sales is 5%. If the company does not maintain a TIE ratio of at least 5 times, its bank will refuse to renew the loan, and bankruptcy will result. What is Manors TIE ratio?

4.11: Complete the balance sheet and sales information in the table that follows for Hoffmeister Industries using the following financial data:

Debt ratio: 50%

Quick ratio: 0.80

Total assets turnover: 1.5

Days sales outstanding: 36.5 days

Gross profit margin on sales: (Sales Cost of goods sold)/ Sales 25%

Inventory turnover ratio: 5

Calculation is based on a 365- day year.

Balance Sheet Cash _________ Accounts payable _______

Accounts receivable _________ Long- term debt 60,000

Inventories _________ Common stock _______

Fixed assets _________ Retained earnings 97,500

Total assets $ 300,000 Total liabilities and equity

Sales _________ Cost of goods sold _______

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#### Solution Summary

The solution explains the calculation of various ratios and preparation of balance sheet