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Final Application Project

In this case the liabilities calculated in the

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Unformatted text preview: er Company Net Income (Loss) vs. Free Cash Flow 269,603 300,000 252,426 250,000 200,000 163,887 150,000 100,000 69,379 84,887 Net Income Free Cash Flow 50,000 - (50,000) (100,000) 2010 2011 2012 (57,057) Cooper Tire & Rubber Company Share Price, Earnings Per Share and Free Cash Flow Per Share 30.00 25.00 20.00 EPS 15.00 Share Price 10.00 FCFS 5.00 - (5.00) 2010 2011 2012 Correlations Net income to FCF EPS to FCF FCFS to share price Net income to share price .97 (.51) (.28) (.51) As you can see from the correlations displayed in the charts above, net income and FCF display a direct relationship with a correlation of .97. The net income increased dramatically from 2010 to 2011, then to a slight drop in 2012. As a result of the increase in FCF in 2012, share prices were able to recover from the harsh drop that took place in 2011. Among other issues, this drop in stock price was due to an expiration on tariffs of Chinese tire imports. This expiration caused Cooper Tire prices to decrease in response to competition. Working Capital Cycle: Cooper Tires working capital cycle can be defined below 1. The purchase of raw materials. The company’s principle raw materials consist of natural rubber, synthetic rubber, carbon black, and chemicals and steel reinforcement components. 2. The company then manufactures these raw materials to create their products; replacement tires. 3. After production the company sells the tires, receiving revenue. 4. That revenue...
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