Fin 610 Case 2 - CASE 2 1. Quickfixs sales have been...

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CASE 2 1. Quickfix’s sales have been increasing significantly over the past 4 years. The increase in sales each year is around 10% and even more. The increase in sales has also increased the gross profit each year. However, in the year 2003, increase in Admin and Selling exp is significantly higher. This has resulted in the lower EBIT in the year 2003, which in turn resulted in the net loss. So, compared with sales, the earning growth has not been stable because of the interest on long term loans and the admin and selling expenses. 2. Juan should refer to the Balance Sheets of Quickfix Autoparts, and he should construct the Balance Sheets to develop a fair assessment of the firms’ financial condition, as the balance sheet is a summary of the value of all assets, liabilities and ownership equity for the company at the end of its financial year. It is a snapshot of a company’s financial condition on a given date. Thus, Juan should refer to and construct the Balance Sheet to develop a fair assessment of the firm’s financial condition. Another significant statement that Juan should prepare is the statement of cash flows. The net operating income includes the non cash expenses like depreciation which did not take up any cash. So in order to get the true picture of the company’s cash position, Juan should prepare and carefully analyze the cash flow statement of the company, for all those years. 3. In order to get a good grasp of what is going on with Quickfix’s performance; Juan should do the following calculations: Return on Assets = Net Income / [(Beginning + Ending Total Assets)/2] à Measures the
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Fin 610 Case 2 - CASE 2 1. Quickfixs sales have been...

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