Fin534 Homework Set #1

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FIN 534- Homework Set #1 1. What is the free cash flow for 2013? -$607,378 NOPAT $10,464- NOWC $617,842 2. Suppose Congress changed the tax laws so that’s Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and net cash flow? Depreciation is considered a non-cash expense. It is typically listed as a reduction from expenses. Depreciation affects cash flow by reducing the amount of cash a business must pay in income taxes. 3. Calculate the current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company’s liquidity position in 2013? AS the current and quick ratios both went down over the past year, I am concerned that the company liabilities may be rising faster than assets and we may not be able to liquidate assets quickly enough to cover debt, if necessary. 4. Calculate the 2013 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. Inventory Turnover= 4, DSO= 39.6, Fixed Assets Turnover= 6.2, Total Assets Turnover= 2 5. Calculate the 2013 debt ratio, liabilities-to-assets ratio, times-interest-earned, and EBITDA coverage ratios. What can you conclude from these ratios? Debt ratio is high and has risen from 2012. While liabilities-to-assets have risen considerably, TIE and EBITDA has dropped dramatically. All of these ratios show that the company has a relatively high level of debt. 6. Calculate to 2013 profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these ratios? The profit margin, BEP, ROA and ROE all dropped dramatically from 2012. We have an extremely difficult time remaining profitable. 7. Calculate the 2013 price/earnings ratio, price/ cash flow ratio, and market/ book ratio. P/E= -6.3, P/C= 27.5, M/B=

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