Assume that you recently graduated

Assume that you recently graduated

Assume that you recently graduated and have just reported to work as an investment advisor at the onof the firms on Wall Street. You have been presented and asked to review the following Income

Statement and Balance Sheets of one of the firm’s clients. Your boss has developed the following set ofquestions you must answer.  

Income Statements and Balance Sheet  

Balance Sheet

2012 2013 2014    

Cash $9,000  $7,282  $14,000  

Short-term investments 48,600 20,000  71,632    

Accounts receivable 351,200 632,160  878,000   

Inventories 715,200 1,287,360  1,716,480   

Total current assets $1,124,000  $1,946,802  $2,680,112  

What is the free cash flow for 2014?

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

Calculate the 2014 current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company’s liquidity position in 2013?

Use the extended DuPont equation to provide a summary and overview of company’s financial condition as projected for 2014. What are the firm’s major strengths and weaknesses?
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