FIN570 Final Exam Latest 2024

FIN570 Final Exam 

1. Consider the following data for Company Y (12 points):                                            

Balance Sheet                  

Balance Sheet as of:                      

                               Dec-31-2018         Dec-31-2019

Currency               Million USD       Million USD                     

ASSETS                

Cash and Equivalents     25.0        17.0

Total Cash & ST Investments      25.0        17.0                      

Accounts Receivable      17.0        –  

Other Receivables           –              –  

Total Receivables            17.0        –  

Inventory            25.0        38.0

Total Current Assets       67.0        55.0

LIABILITIES                         

Accounts Payable                      150.0            152.0

Accrued Exp.                                 25.0              35.0

Current Portion of LT Debt           2.0           1.0

Current Portion of Leases            1.2           1.5

Total Current Liabilities                 178.2     189.5

Compute this company’s current ratio, quick ratio and cash ratio in 2018 and 2019. Just do the calculation and keep the answers to two decimal points; there is no need to discuss anything. (12 points)              

(2 points per answer)                    

                           2018               2019

Current Ratio                    

Quick Ratio                        

Cash Ratio                          

                               

NOTE – The answer cells must remain in B 29/30/31 and C 29/30/31.                        

You may show live formula in the designated answer cells above or lay out your work in the space below in order to receive credit.  

 

2. Consider the following data for Company X (12 points):                                            

Cash Flow                                           

For the Fiscal year period ending                                            

                                                                       12 months     12 months           12 months

                                                                       Dec-26-2018                 Dec-25-2019       Dec-25-2020

Currency                                                      Million USD                Million USD       Million USD

                                               

Net Income                                                              35.0                  49.0        (35.0)

Depreciation & Amort.                                          19.0                17.0        18.0

(Gain) Loss From Sale of Assets                            0.9                1.4          2.0

(Gain) Loss From Sale of Investments                      –              –              –  

Asset Writedown % Restructuring Costs                            0.7              –              –  

Stock-Based Compenstation                                  6.1               7.5          7.1

Other Operating Activities                                      7.6               3.2          2.3

Change in Acc. Receivable                                        (5.5)           (1.7)      0.2

Change in Inventories                                              (0.5)            (0.5)      2.5

Change in Acc. Payable                                              3.2              4.2          12.3

Change in Other Net Operating Assets                  1.1           0.1          0.3

Cash From Ops.                                                                           67.6              80.2        9.7                                        

Capital Expenditure                                                   (35.0)        (43.0)   (45.0)

Cash Acquisitions                                                             –              –              –  

Divestitures                                                                     –                  –              –  

Invest. In Marketable & Equity Securt.                    –             –              –  

Cash from Investing                                                   (35.0)        (43.0)   (50.0)  

Short Term Debt Issued                                                                –               –              –  

Long Term Debt issued                                                 –               –              75.0

Total Debt issued                                                             –               –              75.0

Short term debt repaid                                                –               –              –  

Long term debt repaid                                                    –              –              –  

Total debt repaid                                                              –              –              –            

Issuance of Common Stock                                          2.3         1.1          0.2

Repurchase of Common Stock                                  (3.4)       (10.0)   –  

Total Dividends Paid                                                         –             –              –  

Other Financing Activities                                            (0.8)       (2.7)      0.8

Cash from Financing                                                      (1.9)        (11.6)   76.0      

Net Change in Cash                                                         30.7         25.6        35.7

Are the following statements true or false (1 point for each sub question; blue box)? Briefly explain why (1 paragraph at most, one sentence should be enough, 3 points for each sub question; green box):       

2.1 Company X increased overall cash flow (i.e. net change in cash) in 2020 by reducing capital expenditures. (4 points)                                 

2.2 Despite having lower operating cash flow in 2020, company X decided to increase long-term debt (4 points)                                

2.3 This company managed to increase cash holdings in 2020 due to better operational performance (4 points)                                 

NOTE – The answer cells must remain in A 46/48/50 and B 46/48/50.        

 

3. An analyst is comparing liquidity ratios for the following two companies. The analyst concludes that company 1 has higher liquidity than company 2 because company 1 has a higher current ratio and because company 2 has very little cash on the balance sheet.                                                                 

                                                                               

Company 1                                                                        

                Cash      70                           Payables              240

                Inventory            250                         Short term debt               150

                Receivables        140                                        

Company 2                                                                        

                Cash      20                           Payables              240

                Inventory            120                         Short term debt               150

                Receivables        250                                        

                                                                               

Is the analyst correct (stating “Yes, the analyst is correct” or “No, the analyst in not corret” in the blue box, 3 points)? What other variables do you need to consider in order to draw this conclusion? (7 points, provide reasoning in the green box and calculations below)                                                                        

                                                                               

NOTE – The answer cell must remain in A16 and B16. Please lay out any supporting calculations below.   

 

4. Consider the following data                                                                                   

–      A machine costs $800 today (year 0). Assume this investment is fully tax-deductible, as stipulated by the US corporate tax code of 2018.                                                                                             

–      This company has current pre-tax profits from other projects that are greater than $800, so it can take full advantage of the investment tax break above in year 0.                                                                                           

–      The machine will generate operating profits before depreciation (EBITDA) of $425per year for 4 years. The first cash flow happens one year after the machine is put in place (year 1).                                             

–      Depreciation is not tax-deductible. Notice that you do not need to calculate depreciation at all to solve this problem since it has no effect on taxes.                                                                                  

–      The tax rate is 21%                                                                  &n