I need assistance in how to do b-i, if unable to do that many-- please assist wi
ID: 2730225 • Letter: I
Question
I need assistance in how to do b-i, if unable to do that many-- please assist with what you can. Thank you Part 2 Fundamental Concepts in Financial Management Jamison examined monthly data for 2014 (not given in the case), and she detected an improving pattern during the year. Monthly sales were rising, costs were falling, and large losses in the early months had turned t a small profit by December. Thus, the annual data look somewhat worse than final monthly data. Also, it appears to be taking longer for the advertising program to get the message out, for the new sales offices to generate sales, and for the new manufacturing facilities to operate efficiently. In other words, the lags between spending money and deriving benefits were longer than D'Leon's managers had anticipated. For these reasons, Jamison and Campo see hope for the company-provided it can survive in the short run. Jamison must prepare an analysis of where the company is now, what it must do to regain its financial health, and what actions should be taken. Your assignment is to help her answer the following questions Provide clear explanations, not yes or no answers. Why are ratios useful? What are the five major categories of ratios? Calculate D'Leon's 2015 current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company's liquidity positions in 2013, in 2014, and as projected for 2015? We often think of ratios as being useful (1) to managers to help run the business, (2) to bankers for credit analysis, and (3) to stockholders for stock valuation. Would these different types of analysts have an equal interest in the company's liquidity ratios? Explain your answer Calculate the 2015 inventory tunover, days sales outstanding (D50), fixed assets turmover, and total assets turnover. How c. Calculate the 2015 inventory turnover, days sales outstanding (DSO), fixed assets turnover, a does D'Leon's utilization of assets stack up against other firms in the industry? I and times-interest-earned ratios. How does D'Leon compare with the on assets (ROA), f. Calculate the 2015 price/earnings ratio and market/book ratio. Do these ratios indicate that investors are vide a summary and overview of D'Leon's financial condition as projected d. Calculate the 2015 debt-to-capital industry with respect to financial leverage? What can you conclude from these ratios? Calculate the 2015 operating margin, profit margin, basic earning power (BEP), return return on equity (ROE), and return on invested capital (ROIC). What can you say about these ratios? expected to have a high or low opinion of the company? for 2015. What are the firm's major strengths and weaknesses? Use the following simplified 2015 balance sheet to show, in general terms, how an improvement in the DSO would tend to affect the stock price. For example, if the company could improve its collection procedures and thereby lower its DSO from 45.6 days to the 32-day industry average without affecting sales, how would that change "ripple through" the financial statements (shown in thousands below) and influence the stock price? h. $ 878 1,802 Accounts receivable Other current assets Net fixed assets Total assets Current liabilities Debt Equity Liabilities plus equity S 845 700 1,952 $3,497 $3.497 i. Does it appear that inventories could be adjusted? If so, how should that adjustment affect D'Leon's profitability and stock price?Explanation / Answer
a) Ratio's are useful in such a way it helps managers/internal users in using and assessing the firm's performance, lenders in evaluatin the firms likelihood of repaying debts, shareholders in forcasting future earnings and dividend that can the Inc able to provide it standardizes numbers, facilities comparisons and used to highlight weaknesses and strenghts.
Five major Categories of ratio's:-
a. Liquidity Ratio
show the relationship of a firm's current assets to its currentliabilities, and thus its ability to meet maturing debts.
b. Asset Management
measure how effectively a firm is managing its assets.
c. Debt Management
reveal (1) the extent to which the firm is financed with debt and(2) its likelihood of defaulting on its debt obligations.
d. Profitability
show the combined effects of liquidity, asset management, anddebt management policies on operating results.
e. Market Value
relate the firm's stock price to its earnings, cash flow, and bookvalue per share, thus giving management an indication investorsthink of the company's past
Calculation of current ratios
Current Ratio=Current Assets/Current Liabilities
=2680112 / 1144800
= 2.34
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