FM11_Ch_14_Mini_Case_student_(Hussadin)

FM11_Ch_14_Mini_Case_student_(Hussadin) - 6/27/2003 Chapter...

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6/27/2003 Chapter 14 Mini Case Situation 2004 Balance Sheet (in mil) Cash and Securities $20.0 1% Accounts Receivable $240.0 12% Inventories $240.0 12% Total Current Assets $500.0 Net Fixed Assets $500.0 25% Total Assets $1,000.0 Accounts Payable and Accruals $100.0 5% Notes Payable $100.0 Total Current Liabilities $200.0 Long Term Debt $100.0 Common Stock $500.0 Retained Earnings $200.0 Total Liabilities and Equity $1,000.0 2004 Income Statement (in mil) Sales $2,000.0 Variable Costs $1,200.0 60% Fixed Costs $700.0 35% EBIT $100.0 Interest $10.0 EBT $90.0 Taxes(40%) $36.0 Net Income $54.0 Dividends(40%) $21.6 Additions to Retained Earnings $32.4 2004 Betty Simmons, the new financial manager of Southeast Chemicals (SEC), a Georgia producer of specialized chemica fruit orchards, must prepare a financial forecast for 2005. SEC's 2004 sales were 2 billion, and the marketing depar forecasting a 25 percent increase for 2005. Betty thinks the company was operating at full capacity in 2004 but is no this. The 2004 financial statements, plus some other data, are shown below. Percent of Sales Percent of Sales
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Key Ratios SEC Industry Profit margin 2.70% 4.00% net income/sales ROE 7.71% 15.60% net income/total equity(comm DSO (Day Sales Outstanding) 43.80 32.00 (AR/sales)*365 Inventory turnover 8.33 11.00 sales/inventories Fixed asset turnover 4.00 5.00 sales/fixed asset Debt/Assets 30.00% 36.00% (CL+LTdebt)/Total Assets TIE (Time Interest Earn) 10.00 9.40 ebit/interest Current ratio 2.50 3.00 CA/CL NOPAT/Sales 3.00% 5.00% (ebit*(1-tax))/sales Operating Capital / Sales 45.00% 35.00% Return on Invested Capital (NOPAT/Capital) 6.67% 14.00% USING THE AFN EQUATION Additional Data Sales Increase = 25% 2004 Profit Margin= 2.70% Payout Ratio= 40% AFN= - - = x = x = = x = x = = x Sales x = x x = Assume that you were recently hired as Simmons' assistant, and your first major task is to help her develop the forec asked you to begin by answering the following set of questions. a. Describe three ways that pro forma statements are used in financial planning. Answer: See Chapter 14 Mini Cas b. Explain the steps in financial forecasting . Answer: See Chapter 14 Mini Case Show c. Assume (1) that SEC was operating at full capacity in 2004 with respect to all assets, (2) that all assets must grow
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This note was uploaded on 03/16/2011 for the course FM 11 taught by Professor Teerana during the Spring '11 term at Thammasat University.

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FM11_Ch_14_Mini_Case_student_(Hussadin) - 6/27/2003 Chapter...

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