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BADM 2001 Introduction to Business Fall 2021 Assignment (3) Look at the financial statements excerpted from the Foundation FastTrack and answer the following questions, explaining the reasons and justification for your answers. Total 50 points 1) Look at the Cash Flow Statement Survey. a. Which company(s) got an emergency loan although it was profitable? How much? (4 points) b. For each company you mentioned in (a), explain why it got an emergency loan. (8 points) c. How could each company you mentioned in (a) have avoided the emergency loan? (6 points) d. For the companies: Baldwin, Digby, Erie and Ferris, evaluate how well each company is managing its cash by looking at the following: (24 points) Ending cash position (BS) Net change in cash position (CF) Compare investment with financing (CF) - Net Income (CF) Any huge cash outflow/inflow (CF) 2) Which company has the largest asset base? How big? (2 points) (Hint: look at the BS) 3) Evaluate the capital structure of the company you picked in (QW2) above. Calculate the leverage ratio (Assets/Equity) and the percentage of equity to debt in the company's assets. Comment on your findings. (6 points) Hint: A company with too much debt over 70% of assets) is too risky as it may not be able to pay back all of this debt and its interest. For banks, this company is a risky borrower - very few banks will be willing to lend it and those that do will charge a very high interest rate to match the risk of the company On the other hand, a company with too much equity (over 70% of assets) is at risk of being taken over (ie, bought out by another company). The company is an attractive target for acquisition because there is an opportunity for whoever acquires this company to borrow debt easily using all the equity as collateral and to use all of this borrowing to expand the company and make more profits. The fact that the current management is not making use of this opportunity indicates that current management is out of profitable growth ideas. If the company is acquired, the top management will normally be fired. Page 1 of 3 F121242 Fast Track Andrews Baldwin Round: 3 Dec. 31, 2023 Chester Digby Ene Ferris $1,736 54573 33.512 55356 5513 52.036 527 51,733 50 52853 50 2.957 50 52.327 50 51920 50 5967 (511,157) 151058 57.450) 5387 (55,057 5380 $1,256 551 (57.530 5529 54315 $1569 (54.967) $2182) 5891 5237 5134 (5553) 35 523 $1320 $2.74 (51580) 3902 Financial Summary Cash Flow Statement Survey Cashflows from operating activities Net Income L03) Adjustment for non-cash tems Depreciation Extraordinary gainstoestureofts Changes in current assets and abilities Accounts payable Inventory Accounts Receivable Net cash tom operations Cash flows from investing activities Plant improvements.net) Cash flows from financing activities Dividends paid Sales of common stock Purchase of common stock Cash from long term debt issued Eaty retirement of long term dett Retirement of current del Cash from curent crot borrowing Cash from emergency Net cash from financing activities Net change in cash position 58,340) 55.000 (513 2001 516714) 54.800 $1.600) 50 50 50 50 51.000) (5067) 50 $2,200 50 50 ($1,000 50 50 50 5700 50 $7248 50 5867) $1.000 56.138 50 $7.254 50 59.435 50 SO 50 50 51.000 50 50 50 50 52.500 50 5867) 50 50 50 50 36 3 50 50 50 50 5021 51,187) $14.220 $15852 $133 $1830 ($15.00 (55 610 $3295 529 SUS (5069 Page 2 of 3 5 Balance Sheet Survey Cash Accounts Receivable Inventory Total Cuendes 55754 58845 $13553 5453 $10.00 51456 Digby 52.094 55.41 57,400 5160 Ene 56545 54,468 $3.734 514745 Femme 3150 54583 2974 59243 519254 530 540 Pantandement Accumulated Depreciation Total Funds 5.000 1.227 521773 535328 545300 5110201 534200 544.362 31029 534067 535400 510553 525342 $28.000 30227 $19.573 32167 Total Assets 540712 548,845 $40.592 528 815 5. Accounts Payable Curent Der Total Ourent Liabilities Long Term Date Total Liables 54446 50 S14 53390 9700 516531 $50.00 54402 50 54402 $3.013 50 33.000 53.462 30 $3.462 SET $8.30 517617 51.77 $19.145 2577 $16.245 $20.950 $8.330 511346 $10,330 51379 SI 5479 548578 2335 54.222 595143 519. 165 310.107 $19.343 529,455 550 100 55.123 122.22 526745 53.523 $11.49 515020 SIS 500 505325 54343 S4592 528010 Common Stock Retained Eaming To out Total Liabilities & Owners Equity Income Statement Survey Sales Variable Costo Material Caryl Contribution Marian Deprecation SGARSD Promo Sem Other Feesitos TOMS EBIT Internet Short term Longtem And 57:07 581226 570125 59.95 5202 50739 51010 315 5275 $3200 538.377 316.900 2.353 510165 Digby 57220 519 400 522308 2959 51170 503 7.225 51709 31.990 372 53.512 Ene $54.336 $35254 $19.072 52.327 57.320 350 59375 361 $2.943 5109 55.354 Femme 556902 $39.509 317473 31.520 $13.450 $123 $1.50 31.154 512.205 sc 540 31.379 5954 335 51736 127 52,513 Proft Sharing Net Profit FOUNDATION & FAST TRACK 3110 50 1218 3457) $50 3513 Page 3 Page 3 of 3 BADM 2001 Introduction to Business Fall 2021 Assignment (3) Look at the financial statements excerpted from the Foundation FastTrack and answer the following questions, explaining the reasons and justification for your answers. Total 50 points 1) Look at the Cash Flow Statement Survey. a. Which company(s) got an emergency loan although it was profitable? How much? (4 points) b. For each company you mentioned in (a), explain why it got an emergency loan. (8 points) c. How could each company you mentioned in (a) have avoided the emergency loan? (6 points) d. For the companies: Baldwin, Digby, Erie and Ferris, evaluate how well each company is managing its cash by looking at the following: (24 points) Ending cash position (BS) Net change in cash position (CF) Compare investment with financing (CF) - Net Income (CF) Any huge cash outflow/inflow (CF) 2) Which company has the largest asset base? How big? (2 points) (Hint: look at the BS) 3) Evaluate the capital structure of the company you picked in (QW2) above. Calculate the leverage ratio (Assets/Equity) and the percentage of equity to debt in the company's assets. Comment on your findings. (6 points) Hint: A company with too much debt over 70% of assets) is too risky as it may not be able to pay back all of this debt and its interest. For banks, this company is a risky borrower - very few banks will be willing to lend it and those that do will charge a very high interest rate to match the risk of the company On the other hand, a company with too much equity (over 70% of assets) is at risk of being taken over (ie, bought out by another company). The company is an attractive target for acquisition because there is an opportunity for whoever acquires this company to borrow debt easily using all the equity as collateral and to use all of this borrowing to expand the company and make more profits. The fact that the current management is not making use of this opportunity indicates that current management is out of profitable growth ideas. If the company is acquired, the top management will normally be fired. Page 1 of 3 F121242 Fast Track Andrews Baldwin Round: 3 Dec. 31, 2023 Chester Digby Ene Ferris $1,736 54573 33.512 55356 5513 52.036 527 51,733 50 52853 50 2.957 50 52.327 50 51920 50 5967 (511,157) 151058 57.450) 5387 (55,057 5380 $1,256 551 (57.530 5529 54315 $1569 (54.967) $2182) 5891 5237 5134 (5553) 35 523 $1320 $2.74 (51580) 3902 Financial Summary Cash Flow Statement Survey Cashflows from operating activities Net Income L03) Adjustment for non-cash tems Depreciation Extraordinary gainstoestureofts Changes in current assets and abilities Accounts payable Inventory Accounts Receivable Net cash tom operations Cash flows from investing activities Plant improvements.net) Cash flows from financing activities Dividends paid Sales of common stock Purchase of common stock Cash from long term debt issued Eaty retirement of long term dett Retirement of current del Cash from curent crot borrowing Cash from emergency Net cash from financing activities Net change in cash position 58,340) 55.000 (513 2001 516714) 54.800 $1.600) 50 50 50 50 51.000) (5067) 50 $2,200 50 50 ($1,000 50 50 50 5700 50 $7248 50 5867) $1.000 56.138 50 $7.254 50 59.435 50 SO 50 50 51.000 50 50 50 50 52.500 50 5867) 50 50 50 50 36 3 50 50 50 50 5021 51,187) $14.220 $15852 $133 $1830 ($15.00 (55 610 $3295 529 SUS (5069 Page 2 of 3 5 Balance Sheet Survey Cash Accounts Receivable Inventory Total Cuendes 55754 58845 $13553 5453 $10.00 51456 Digby 52.094 55.41 57,400 5160 Ene 56545 54,468 $3.734 514745 Femme 3150 54583 2974 59243 519254 530 540 Pantandement Accumulated Depreciation Total Funds 5.000 1.227 521773 535328 545300 5110201 534200 544.362 31029 534067 535400 510553 525342 $28.000 30227 $19.573 32167 Total Assets 540712 548,845 $40.592 528 815 5. Accounts Payable Curent Der Total Ourent Liabilities Long Term Date Total Liables 54446 50 S14 53390 9700 516531 $50.00 54402 50 54402 $3.013 50 33.000 53.462 30 $3.462 SET $8.30 517617 51.77 $19.145 2577 $16.245 $20.950 $8.330 511346 $10,330 51379 SI 5479 548578 2335 54.222 595143 519. 165 310.107 $19.343 529,455 550 100 55.123 122.22 526745 53.523 $11.49 515020 SIS 500 505325 54343 S4592 528010 Common Stock Retained Eaming To out Total Liabilities & Owners Equity Income Statement Survey Sales Variable Costo Material Caryl Contribution Marian Deprecation SGARSD Promo Sem Other Feesitos TOMS EBIT Internet Short term Longtem And 57:07 581226 570125 59.95 5202 50739 51010 315 5275 $3200 538.377 316.900 2.353 510165 Digby 57220 519 400 522308 2959 51170 503 7.225 51709 31.990 372 53.512 Ene $54.336 $35254 $19.072 52.327 57.320 350 59375 361 $2.943 5109 55.354 Femme 556902 $39.509 317473 31.520 $13.450 $123 $1.50 31.154 512.205 sc 540 31.379 5954 335 51736 127 52,513 Proft Sharing Net Profit FOUNDATION & FAST TRACK 3110 50 1218 3457) $50 3513 Page 3 Page 3 of 3

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