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    Financial Statement and Cash Flow Analysis

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    You have been hired by First Citizens Bank as a financial analyst. One of your first job assignments is to analyze the present financial condition of Bradley Stores, Incorporated. You are provided with the following 2009 balance sheet and income statement information for Bradley Stores. In addition, you are told that Bradley Stores has 10,000,000 shares of common stock outstanding, currently trading at $9 per share, and has made annual purchases of $210,000,000.

    Your assignment calls for you to calculate certain financial ratios and to compare these calculated ratios with the industry average ratios that are provided. You are also told to base your analysis on five categories of ratios: (a) liquidity ratios, (b) activity ratios, (c) debt ratios, (d) profitability ratios, and (e) market ratios.

    Balance Sheet (in 000s)

    Cash $ 5,000 Accounts payable $15,000
    Accounts receivable 20,000 Notes payable 20,000
    Inventory 40,000 Total current liabilities $35,000
    Total current assets $65,000 Long-term debt 100,000
    Net fixed assets 135,000 Stockholders' equity 65,000

    Total assets $200,000 Total liabilities and equity$200,000

    Income Statement (in 000s)

    Net sales (all credit) $300,000
    Less cost of goods sold 250,000
    Earnings before interest and taxes $50,000
    Less interest 40,000
    Earnings before taxes $10,000
    Less taxes (40%) 4,000
    Net income $6,000

    Industry Averages for Key Ratios:
    Net profit margin 6.4%
    Average collection period (365 days) 30 days
    Debt ratio 50%
    P/E ratio 23
    Inventory turnover ratio 12.0
    ROE 18%
    Average payment period (365 days) 20 days
    Times interest earned ratio 8.5
    Total asset turnover 1.4
    Current ratio 1.5
    Assets-to-equity ratio 2.0
    ROA 9%
    Quick ratio 1.25
    Fixed asset turnover ratio 1.8

    Assignment

    Use the following guidelines to complete this job assignment. First, identify which ratios you need to use to evaluate Bradley Stores in terms of its (a) liquidity position, (b) business activity, (c) debt position, (d) profitability, and (e) market comparability. Next, calculate these ratios. Finally, compare these ratios to the industry average ratios provided in the problem and answer the following questions.

    1. Based on the provided industry average information, discuss Bradley Stores, Inc.'s liquidity position. Discuss specific areas in which Bradley compares positively and negatively with the overall industry.

    2. Based on the provided industry average information, what do Bradley Stores, Inc.'s activity ratios tell you? Discuss specific areas in which Bradley compares positively and negatively with the overall industry.

    3. Based on the provided industry average information, discuss Bradley Stores, Inc.'s debt position. Discuss specific areas in which Bradley compares positively and negatively with the overall industry.

    4. Based on the provided industry average information, discuss Bradley Stores, Inc.'s profitability position. As part of this investigation of firm profitability, include a DuPont analysis. Discuss specific areas in which Bradley compares positively and negatively with the overall industry.

    5. Based on the provided industry average information, how is Bradley Stores, Inc. viewed in the marketplace? Discuss specific areas in which Bradley compares positively and negatively with the overall industry. 6. Overall, what are Bradley's strong and weak points? Knowing that your boss will approve new loans only to companies in a better-than-average financial position, what is your final recommendation (approval or denial of loan)?

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    https://brainmass.com/business/financial-statements/financial-statement-cash-flow-analysis-370612

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