Project #161367 - Finance

Business Tutors

Subject Business
Due By (Pacific Time) 01/03/2017 12:00 am

#1) Zapatera Enterprise is evaluating its financing requirements for the coming yr. The firm has only been in business for one yr. but its CFO predicts that the firm's operatng  expenses, current assets, net fixed assets, and current liabilities will remain at their current proportion of  sales. Last year Zapatera had $11.57 million in sales with net  income of $1.16 million. The firm anticipates  that next  yrs sales will reach $14.45 million with net income rising to $2.03 million. Given its present high rate of growth, the firm retains all of its earnings to help deffay the cost of new investments. The firm's balance sheet for the year just ended is as follows: data table   Zapatera Enterprises, Inc.

 Balance Sheet             12/31/13                % of sales  

current assets              2,700,000                  23.336%

net fixed assets             5,800,000                  50.130%

total                               8,500,000  

Liabilities & owners equity

accounts payable            3,300,000                    28.522% long term debt                2,200,000                       NA  a  total liabilities                  5,500,000        

common stock                  1,300,000                       NA a paid in capital                    2,200,000                       NA a retained earnings              -500,000  

common equity                   3,000,000  

total                                     8,500,000

 NA  a This figure does not vary directly with  sales and is assumed to remain constant for purposes of forecasting next year's  financing  requirements. Estimate Zapatera's total financing requirements  (total assets) and its net funding requirements ( discretionary financing needed) for 2014. Note: Use the percentage of sales given in Zapatera Enterprises balance sheet for 2013. Hint: Make sure to round all intermediate calculations to at least five decimal places. The 2014 retained earnings are $----------(round to nearest dollar).   Solving the problem

 $14.45 millionX appropriate %  for currrent assets, net fixed assets, and current liabilities.  (appropriate % values are 23.336%, 50.130%, 28.522%) 2014 retained earnings can be calculated using the following equation: 2014 retained earnings = 2013 retained earnings +2014 net income - 2014 dividends    

 discretionary financing needs (DFN) = total assets - total liabilities and common equity

 2014 retained earnings=$ -500,000 + $2,030,000 - $0= $15,300,000

 Zapatera's Enterprises, Inc.

Pro    forma      Balance Sheet      12/31/14       % of Sales current assets                                                     23.336% net fixed assets                                                    50.130% total        

#2) Using the following industry average ratios, to construct a pro forma balance sheet.   data table  

total asset turnover                           1.8 times

 avg. collection period (assume 365 day yr)    8.6 days fixed asset turn over                               4.9 times   inventory turnover (based on cost of oods sold)   2.6 times current  ratio                                                2.5 times  sales (all on credit )                                   $3.94 million  cost of goods sold                                      77% of sales  debt ratio                                                    51%

 more information  

cash  $--------------             current liabilities$---------------- inventory----------------       long term debt------------------- acc. receivable---------------    total liabilities $-----------------net fixed assets---------------   common equity----------------total---------------------------     total-------------------------- #4) The balance sheet of Thompson Trucking Company (TTC)  follows : data table

 Thompson Trucking Company Balance Sheet , Dec 31,13 ( $ millions)

currrent assets  $9.96           acc payable 5.44

net fixed assets  15.55           notes payable   0.00

 total                   25.51          bonds payable   9.88                                                           common equity 10.19

                                               total                  25.51

 TTC  had sales for the year ended 12/31/13 of $51.59 million. the firm follows a policy of paying all net earnings  out to its common stockholders in cash  dividends. TTC  generates no funds from its earnings that can be used to expand its operations. (assume depreciation expense is just equal to the cost of replacing worn out assets). Hint: make sure to round all intermediate calculations to at least five decimal places. (a) If TTC anticapates sales of $78.08 million during the coming year, develop a pro forma balance sheet for the firm for 12/31/14. Assume that current assets vary as a percent of sales, net fixed assets remain unchanged, and accounts payable vary as a percent of sales. Use notes payable as a balancing entry.(round to nearest dollar). (b) How much new financing will TTC need next yr?  (c) What limitation does the percent of sales forecast method suffer from ? discuss briefly.  

TTC pro  forma balance Sheet 12/31/14  

current assets  $----------------------------------

net fixed assets-----------------------------

total assets $-----------------------------

 acc payable --------------------------------

notes payable ----------------------------------

 bonds payable--------------------------------

common equity---------------------------------  

total liabilities + common equity-------------------------  solving the problem

 current assets as a percent of sales = current assets/ sales= 9,960,000/ 51,590,000=0.19306=19.306%    acc payable as a percent of sales= accounts payable/ sales=5,440,000/51,590,000= 0.10544 or 0.10545 = 10.544% or 10.545%  

 #5) The following table contains current asset and current liability balances for Deere & Company :  data table

 $ thousands                2013             2012            

current assets  cash&           

cash equivalents          2,131,200     2,189,300   

short term investments      0              1,531,800  

 net receivable              3,941,300       3,674,500  inventory                     3,065,200        2,383,400

total current  assets        9,137,700        9,779,000  

 $ Thousands                                           2011  

current assets  cash &                                      

 cash equivalents                              1,749,900    

 short term investment                                0  

net receivable                                    3,599,000

 inventory                                          1,935,100    

total current assets                            7,284,000

 

 current liabilities           2013                  2012              

acc payable                 6,594,100           3,102,700

short term/long term debt  8,488,100            9,945,200

other current liabilities           0                 2,720,900

 total current liabilities      15,082,200        15,768,800  

 

current  liabilities                  2011

 acc payable                          4,668,600

short term/long term debt     8,158,000

 other currrent liabilities                0

 total current liabilities            12,826,600  

 a.) Measure the liquidity of Deere Co. for each year using the company's net working capital and current ratio. (enter the answer in thousands of dollars). (b) Is the trend in Deere's liquidity improving over this period?

                             2013                    2012              2011

net working capital ($000)    

 current ratio

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