MiniCase(topic2)(1)财务管理英文版教学课件大学二年级下学期用
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Mini Case （Topic 2）
Donna
Jamison, a 2003 graduate of the University of
Tennessee with four years of banking
experience, was recently brought in as
assistant to the chairman of the board of
Computron
Industries, a manufacturer of
electronic calculators.
The Company doubled
its plant capacity, opened new sales offices
outside its home territory, and
launched an
expensive advertising campaign. Computron’s
results were not satisfactory, to put it
mildly. Its board of directors, which
consisted of its president and vice-president plus
its major
stockholders(who were all local
businesspeople), was most upset when directors
learned how the
expansion was going. Suppliers
were being paid late and were unhappy, and the
bank was
complaining about the deteriorating
situation and threatening to cut off credit. As a
result, Al
Watkins, Computron’s president, was
informed that changes would have to be made, and
quickly,
or he would be fired. Also, at the
board’s insistence Donna Jamison was brought in
and given the
job of assistant to Fred Campo,
a retired banker who was Computron’s Chairman and
largest
stockholder. Campo agreed to give up a
few of his golfing days and to help nurse the
company
back to health, with Jamison’s help.
Jamison began by gathering financial
statements and other data.
BALANCE SHEET
2008 2007
Assets
Cash $$
7,282 $$ 9,000
Short-term
investments 0
48,600
Accounts receivable
632,160 351,200
Inventories
1,287,360 715,200
Total
current assets $$ 1,926,802
$$ 1,124,000
Gross fixed assets
1,202,950 491,000
Less
accumulated depreciation 263,160
146,200
Net fixed assets
$$ 939,790 $$ 344,800
Total
assets $$ 2,866,592
$$ 1,468,800
Liabilities and Equity
2008 2007
Accounts
payable $$ 524,160
$$ 145,600
Notes payable
720,000 200,000
Accruals
489,600 136,000
Total
current liabilities $$ 1,733,760
$$ 481,600
Long-term debt
1,000,000 323,432
Common
stock(100,000 shares) 460,000
460,000
Retained earnings
(327,168) 203,768
Total
equity $$ 132,832
$$ 663,768
Total liabilities and equity
$$ 2,866,592 $$ 1,468,800
INCOME STATEMENT
2008 2007
Sales
$$ 5,834,400 $$ 3,432,000
Cost of
goods sold 5,728,000
2,864,000
Other expenses
680,000 340,000
Depreciation
116,960 18,900
Total
operating costs $$ 6,524,960
$$ 3,222,900
EBIT
($$ 690,560) $$ 209,100
Interest
expense 176,000
62,500
EBT
($$ 866,560) $$ 146,600
Taxes(40%)
(346,624)
Net income
($$ 519,936)
EPS
($$ 5.199)
DPS
$$ 0.110
Book value per share
$$ 1.328
Stock price
$$ 2.25
Shares outstanding
100,000
Tax rate
40.00%
Lease payments
40,000
Sinking fund payments
0
STATAMENT OF RETAINED
EARNINGS,2008
Balance of retained
earnings,123107
Add: Net income,2008
Less: Dividends paid
Balance of retained earnings,123108
STATEMENT OF CASH FLOWS, 2008
Operating Activities
Net Income
Adjustments:
Noncash adjustments:
Depreciation
Changes in working capital:
Change in
accounts receivable
Change in inventories
Change in accounts payable
Change in accruals
Net cash provided by operating activities
Long-Term Investing Activities
Cash
used to acquired fixed assets
Financing Activities
Change in
short-term investments
58,640
$$ 87,960
$$ 0.880
$$ 0.220
$$ 6.638
$$ 8.50
100,000
40.00%
40,000
0
$$ 203,768
(519,936)
(11,000)
($$ 327,168)
($$ 519,936)
116,960
(280,960)
(572,160)
378,560
353,600
($$ 523,936)
($$
711,950)
$$ 48,600
Change in notes payable
520,000
Change in long-term debt
676,568
Payment of cash dividends
(11,000)
Net cash provided by financing
activities $$ 1,234,168
Sum: Net change in cash
(1,718)
Plus: Cash at beginning of year
$$ 9,000
Cash at end of year
$$ 7,282
Assume that you are Jamison’s
assistant, and you must help her answer the
following
questions for Campo.
a. What
effect did the expansion have on sales, net
operating profit after
taxes(NOPAT),net
operating working capital, and net income?
b.
What effect did the expansion have on net cash
flow, operating cash flow, and free
cash flow?
c. Jamison also has asked you to estimate
Computron’s EVA. She estimates that the
after-
tax cost of capital was 11 percent in 2007 and 13
percent in 2008.
d. Looking at Computron’s
stock price today, would you conclude that the
expansion
increased or decreased MVA?
e.
Computron purchases materials on 30-day terms,
meaning that it is supposed to
pay for
purchases within 30 days of receipt. Judging from
its 2008 balance sheet,
do you think Comptron
pays suppliers on time? Explain. If not, what
problems
might this lead to?
f. Comptron
spends money fro labor, materials, and fixed
assets(depreciation) to
make products, and
still more money to sell those products. Then, it
makes sales
that result in receivables, which
eventually result in cash inflows. Does it appear
that Comptron’s sales price exceeds its costs
per unit sold? How does this affect
the cash
balance?
g. Suppose Computron’s sales manager
told the sales staff to start offering 60-day
credit terms rather than the 30-day terms now
being offered. Computron’s
competitors react
by offering similar terms, so sales remain
constant. What effect
would this have on the
cash account? How would the cash account be
affected if
sales doubled as a result of the
credit policy change?
h. Can you imagine a
situation in which the sales price exceeds the
cost of producing
and selling a unit of
output, yet a dramatic increase in sales volume
causes the
cash balance to decline?
i. In
general, could a company like Computron increase
sales without a
corresponding increase in
inventory and other assets? Would the asset
increase
occur before the increase in sales,
and, if so, how would that affect the cash
account and the statement of cash flows?
j. Did Computron finance its expansion program
with internally generated
funds(additions to
retained earnings plus depreciation) or with
external capital?
How does the choice of
financing affect the company’s financial strength?
k. Refer to the income statements and the
statement of cash e
Computron broke even in
2008 in the sense that sales revenues equaled
total
operating costs plus interest
charges. Would the asset expansion have caused the
company to experience a cash shortage which
required it to raise external capital?
l. If
Computron started depreciating fixed assets over 7
years rather than 10 years,
would that affect
(1)the physical stock of assets,(2)the balance
sheet account for
fixed assets,(3)the
company’s reported net income, and (4)its cash
position?
Assume the same depreciation method
is used for stockholder reporting and for
tax
calculations, and the accounting change has no
effect on assets’ physical lives.
m. Explain
how(1)inventory valuation methods, (2)the
accounting policy regarding
expensing versus
capitalizing research and development, and (3) the
policy with
regard to funding future
retirement plan costs(retirement pay and retirees’
health
benefits) could affect the financial
statements.
n. Computron’s stock sells for
$$2.25 per share even though the company had large
losses. Does the positive stock price indicate
that some investors are irrational?
o.
Computron followed the standard practice of paying
dividends on a quarterly
basis. It paid a
dividend during the first two quarters of 2008,
then eliminated the
dividend when management
realized that a loss would be incurred for the
year.
The dividend was cut before the losses
were announced, and at that point the stock
price fell from $$8.50 to $$ would an $$0.11, or
even a $$0.22, dividend
reduction lead to a
$$5.00 stock price reduction?
p. Explain how
earnings per share, dividends per share, and book
value per share are
calculated, and what they
mean. Why does the market price per share not
equal
the book value per share?
q. How
much new money did Computron borrow from its bank
during 2007?How
much additional credit did its
suppliers extend? Its employees and the taxing
authorities?
r. If you were Computron’s
banker, or the credit manager of one of its
suppliers,
would you be worried about your
job? If you were a current Computron employee,
a retiree, or a stockholder, should you be
concerned?
s. The 2008 income statement shows
negative taxes, that is, a tax credit. How much
taxes would the company have had to pay in the
past to actually get this credit? If
taxes
paid within the last 2 years had been less than
$$346,624, what would have
happened? Would this
have affected the statement of cash flows and the
ending
cash balance?
t. Working with
Jamison has required you to put in a lot of
overtime, so you have
had very little time to
spend on your private finances. It’s now April 1,
and you
have only two weeks left to file your
income tax return. You have managed to get
all
the information together that you will need to
complete your return.
Computron paid you
salary of $$45,000, and you received $$3,000 in
dividend from
common stock that you own. You
are single, so your per personal exemption is
$$2,800, and your itemized deduction are
$$4,550.
(1) On the basis of the information
above and the individual tax rate schedule
shown in the topic, what is your tax
liability?
(2) What are your marginal and
average tax rates?
u. Assume that a
corporation has $$100,000 of taxable income from
operations plus
$$5,000 of interest
income and $$10,000 of dividend income. What is the
company’s
tax liability?
v.
Assume
that after paying your personal income tax as
calculated in part t, you
have $$5,000 to
invest. You have narrowed your investment choices
down to
California bonds with a yield of 7
percent or equally risky Exxon Mobil bonds
with a yield of 10 percent. Which one should
you choose and why? At what
marginal tax rate
would you be indifferent to the choice between
California and
Exxon Mobil bonds?