Financial Management - Assignment Example

Question Total assets = current assets + net fixed assets = 27.620% * 14.62 + 52.803% * 14.62 = $11,757,840 Question 2 Cost of goods sold = 72% * 14.62m = $11,383,200Question 3Cash yesNotes payable noMarketable securities noPlant and machinery yes Accounts payable yesInventories yesLong-term debt noQuestion 4a. Current assets = = 16.13870Accounts payable = = 8.83665Thompson trucking companyPro Forma balance sheet as of 12/31/14Current assets 16.13870Net fixed assets 14.

67Total assets 30.8087Accounts payable 8.83665Notes payable 2.97205Bonds payable 9.08Common equity 9.92Total liability and common equity 30.8087 a. 30.8087 – 24.24 = $ 6.5687 million b. The percentage of sales forecast assumes that several balance sheet components can be expressed as percentages of sales and vary proportionately to sales. The assumption is reasonable but in some cases, the business components may not vary proportionately. For instance, the business may enjoy the advantage of economies of scale while purchasing assets and inventory.

Secondly, with high investment machinery, sales can increase without necessarily increasing the machinery. Additionally, the proportion of these components to sales varies hence making past data inappropriate to forecasting. However, the method is simple and appropriate in cases where the required assumptions explained above hold true. Question 5a. Networking capital = current assets – current liabilitiesCurrent ratio = current assets/current liabilities Year 201320122011Net working capital -6311000-6496900-5519800Current ratio 0.5850.60020.565a. The company’s current liabilities exceed current assets across the period, implying that the company is illiquid, i.e. not in a position to clear current liabilities when they are due.

The trend is not clear as the company’s liquidity worsened between 2011 and 2012 but improved in the following year. Question 6Multiple questions 1. D. 270 days or less Question 7 Multiple questions 1 A. Dividend payments ReferencesNarayanaswamy, R. (2013). Financial accounting: A Managerial perspective. Delhi: PHI Learning Private Limited