FINA
Case 1 - Clarkson Lumber Template.xlsx

Note payable to holtz current porti term loan current

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Note payable to Holtz, current porti Term loan, current portion c Term loan c Note payable, Mr. Holtz b a Interest is computed on the average outstanding loan balance at the rate of prime plus 2´%. b Interest is fixed at 11% times the outstanding balance. c Interest is fixed at 10.0% times the outstanding balance; the term loan is secured by the fixed assets and is repayable in semiannual installments of $10,000.
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Clarkson Lumber Company 1993 1994 1995 Percent of sales: Cost of goods 75.4% 75.8% 75.8% 75.2% 76.9% 75.1% Operating expense 21.3% 20.6% 20.8% 23.0% 22.0% 20.6% 1.3% 1.1% 13.7% 12.4% 12.0% 11.6% 12.1% 9.2% 39.1% 34.3% Accounts payable Percent of Total Assets: Current liabilities 29.9% 48.8% 66.5% 65.9% 52.7% 29.2% Accrued expenses 4.6% 3.9% 4.6% 4.1% Long-term liabilities 15.2% 19.0% 6.1% 6.1% 34.8% 16.0% Equity 54.8% 32.2% 27.4% 27.9% 12.5% 54.8% Current ratio 2.49 1.58 1.15 1.16 1.31 2.52 2.05% 1.96% 1.70% 0.47% -0.7% 4.3% Return on assets 6.53% 5.88% 4.70% 0.31% -1.8% 12.2% Return on equity 11.90% 18.28% 17.15% 4.41% -14.3% 22.1% Exhibit 3: Selected Comparative Statistics on Lumber Outlets Low-Profit Outlets a High-Profit Outlets a Average 93-95 1996 b Cash b b Accounts receivable b Inventory b Fixed assets, net b Total Assets b Notes payable, trade b Accrued expenses b Return on sales b a Defined as the bottom 25% and as the top 25% of all contributors, based on return on sales. b Based on forecast sales of $5.5 million in 1996 c Profit margin on sales
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Statement of Cash Flows at December 31, 1994-1995 (thousands of dollars) 1994 1995 Two Years Cash Flows from Operating Activities Net Income $ 68 $ 77 $ 145 Deprecation and Amortization - - $ - +Depreciati Increase in receivables (105) (195) $ (300) -(End-Big) Increase in inventories (95) (155) $ (250) -(End-Big) Increase in trade and accounts payable 127 163 $ 290 +(End-Big) Increase in accruals 3 30 $ 33 +(End-Big) Net cash provided (used) by operating activities $ (2) $ (80) $ (82) Cash Flows from Investing Activities Cash used to acquire fixed assets $ (29) $ (126) $ (155) -[(End-Big) Sale of short term investments - - - -(End-Big) Net cash provided (used) by investing activities $ (29) $ (126) $ (155) Cash Flows from Financing Activities Increase in notes payable $ 60 $ 330 $ 390 +(End-Big) Increase in bonds (long-term debt) 180 (120) $ 60 +(End-Big) Increase in common stock (200) - $ (200) Payment of common and preferred dividends - - $ - Net cash provided (used) by financing activities $40 $210 $ 250 Net Increase in cash $ 9 $ 4 $ 13 Cash at the beginning of the year $ 43 $ 52 $ 43 Cash at the end of the year $ 52 $ 56 $ 56 $ 9 $ 4 $ 13 a The absence of information on depreciation expense results in the use of "net increase in property, plant, and equipment, rather than the actual amount of cash used to purchase property, plant and equipment. It also results in the omission of depreciation expense in the section on cash flows from operating activities. These two adjustments are off- setting and do not impact the "Net increase in cash."
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All assets get a negative sign in front tion )+Depreciation]
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Free Cash Flow Analysis Forec StatQuo1 StatQuo1 1993 1994 1995 1996 1996 Calculating Free Cash Flow EBIT 97 126 155 Tax rate (average) 19% 19% 22% NOPAT $ 79 $ 102 $ 121 Operating current assets 686 895 1,249 Operating current liabilities 255 385 578 NOWC $ 431 $ 510 $ 671 Operating long-term assets 233 262 388 Total net operating capital $ 664 $ 772 $ 1,059 Net investment in working capital $ 108 $ 287 Free cash flow (FCF) $ (6) $ (166) Uses of FCF 1. Pay interest to debtholders 34 2. Repay debtholders 3. Pay dividends to shareholders 4. Repurchase stock from shareholders Total Performance Evaluation Calculating Return on Invested Capital (ROIC) NOPAT $ 79 $ 102 $ 121 Total net operating capital $ 664 $ 772 $ 1,059
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  • Spring '09
  • Balance Sheet, Generally Accepted Accounting Principles, Mr. Holtz, Mr. Clarkson

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