InClassAssignment2-FinancialStatementsforAllied.doc -...

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Financial Statements Financial Case (Allied Food) Ratio Analysis Allied Foods is a processor and distributor of a wide variety of staple foods. Formed in 1978 when several regional firms merged, Allied has grown steadily and it has earned a reputation for being one of the best firms in the industry. Allied’s earnings dropped a bit in 2015, to $133.5 million versus $117.8 million in 2014. Management reported that the drop resulted from losses associated with a drought and from increased costs due to a three-month strike. However, management is painting a more optimistic picture for the future, stating that full operations had been resumed and that several unprofitable businesses had been eliminated. Also, 2016 profits are expected to rise sharply. It is possible that an increase in profitability may not occur and analysts should compare management’s past statements with subsequent results. Balance Sheet of Allied Food Products (Millions of Dollars) Assets 2015 2014 Liabilities & Equity 2015 2014 Cash & sec. $10 $80 Accounts Payable $60 $30 Accounts Receivable $375 $315 Notes Payable $110 $60 Inventories $615 $415 Accruals $140 $130 Total Current Assets $1,000 $810 Total Current Liabilities $310 $220 Net P&E $1,000 $870 Long-term Bonds $754 $580 Total Liabilities $1,064 $800 Preferred Stock (400,000 shares) $40 $40 Common Stock (50 m shares) $130 $130 Retained Earnings $766 $710 Total Common Equity $896 $840 Total Assets $2,000 $1,680 Total Liabilities & Equity $2,000 $1,680 Income Statement for Allied Food Products (Millions of Dollars) 2015 2014 Per Share Data Net Sales $3,000.0 $2,850.0 2015 2014 Operating Costs 2,616.2 2,497.0 Common Stock Price $23.00 $26.00 EBITDA $383.8 $353.0 Earnings per share $2.27 $2.36 Depreciation 100.0 90.0 Dividends per share $1.15 $1.06 Amortization 0.0 0.0 Book value per share $17.92 $16.80 EBIT (operating income) $283.8 $263.0 Cash Flow per share $4.27 $4.16 Less interest 88.0 60.0 EBT $195.8 $203.0 Taxes (40%) 78.3 81.2 Net income before pref. div. $117.5 $121.8 Preferred dividends 4.0 4.0 Net income $113.5 $117.8 Common dividends $57.5 $53.0 Addition to retained earnings $56.0 $64.8 1 | P a g e
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Financial Statements Financial Case (Allied Food) Ratio Analysis Allied Food Product: Statement of Retained Earning (end of Dec., 2015) (millions of dollars) Balance of retained earnings, Dec. 31, 2014 $710.0 Add: Net Income, 2015 113.5 Less: Dividends to common stockholders (57.5) Balance of retained earnings, Dec., 31, 2015 $766.0 Allied Food Products: Statement of Cash Flows for 2015 (millions of dollars) Operating Activities Long term Investing Activities Net income before preferred dividends $117.5 Cash used to acquire fixed assets ($230.0) Additions (sources of cash) Financing Activities Depreciation & amortization $100.0 Increase in notes payable $50.0 Increase in accounts payable 30.0 Increase in bonds 174.0 Increase in accruals 10.0 Payment of common & pref. div. (61.5) Subtractions (uses of cash) Net cash by financing act. $162.5 Increase in accounts receivable (60.0) Net decrease in cash positions ($70.0) Increase in inventories (200.0) Cash & securities at begin. Of yr 80.0 Net cash provided by operating activities ($2.5)
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