Finance Analysis Questions

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Problem 1

Though his sales are increasing from year to year, Elmer Fudd, President of Fudd Enterprises, is concerned because his competitors are stealing some of his prime customers (he is, in effect, beginning to lose his share of the market). Puzzled by these developments, he has hired you to analyze his financials. He has given to you the following key financial items from his annual statements:

 

2012

2011

2010

2009

2008

Sales

$298,000

$256,000

$213,000

$165,000

$135,000

Cost of Goods Sold

125,000

108,000

89,000

69,000

57,000

Ending Gross Receivables

26,000

26,000

25,000

25,000

23,000

Ending Inventory

24,000

18,000

12,000

8,000

4,000

Total Current Assets

52,000

46,000

39,000

37,000

32,000

Total Current Liabilities

$24,000

$23,000

$22,000

$21,000

$18,000

Current Ratio

?

?

?

?

?

Quick Ratio

?

?

?

?

?

DSR

?

?

?

?

?

DSI

?

?

?

?

?

  1. In an effort to assist Fudd, begin by calculating out the current ratio, quick ratio, Days Sales in Receivables and Days Sales in Inventory (20 points).
  2. Using these calculated ratios and your general observations regarding Fudd Enterprises' liquidity and current asset quality, identify two items that may be having an adverse impact on Fudd Enterprises and its ability to retain customers. (20 points)

 

Problem 2

General information applicable to Phoenix Company is provided below.

 

2012

2011

2010

2009

2008

Ind. Average

Debt Ratio (Book-based)

72%

69%

66%

60%

58%

64%

TIE

5.5

4.0

4.9

5.8

7.2

7.0

Bond Rating (S&P)

BBB

BB

BB+

BBB+

AA-

NA

Debt to Equity ratio

?

?

?

?

?

?

First of all, calculate the Debt-to-Equity ratio for Phoenix Company for all five years and also calculate the Debt-to-Equity ratio applicable to Phoenix's industry sector (Industry Average) (5 points). Secondly, comment on the long-term debt-paying ability of this company based on the information provided. Identify items that give you concerns about this company and its financial strengths/weaknesses.

Problem 3

Five years of sales information pertaining to Yummy Yogurts & Crazy Coffees, a retailer that exclusively sells frozen yogurt drinks and specialty coffees in Southern California is presented below.

 

2012

2011

2010

2009

2008

Actual Sales:

$275,000

$262,000

$242,000

$220,000

$189,000

From the BLS Web site, I have retrieved information regarding inflation over this five-year period, specifically as it relates to specialty/novelty drinks in the Southern California market (I have made up these figures so don't bother to look for them). The December index figures are presented below for the past six years.

 

2012

2011

2010

2009

2008

2007

December Index Figure:

269.6

256.1

237.7

220.1

197.7

176.7

Using this information, please perform the following:

  1. First of all, calculate the percentage growth in sales from year to year and comment on the nominal dollar and percentage growth observed for this company. 
  2. Calculate the industry-specific annual inflation rate that applies to the Southern California specialty drink market for the period from 2008 through 2012 using the BLS pricing information provided. 
  3. Lastly, evaluate the nominal sales figures provided in light of the inflation information provided. What is your overall opinion of the strength/weakness in sales in light of the inflation information provided? You should determine the "real" sales growth over the five-year period in addressing this task
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