![for year 2010.
Part A
Jaeden’s Free Cash Flow
The measure of free cash flow (FCF) is the amount of cash
flow available to investors; the providers of debt and equity
capital. It represents the net amount of cash flow remaining
after the firm has met all operating needs and has made all
required payments on both long- term (fixed) and short- term
(current) investments (Graham, Megginson, Smart pg. 34).
However, in order to determine the free cash flow you have to
obtain the operating cash flow (OCF), which are cash inflows
and outflows directly related to the production and sale of
products or services.
OCF = [Earnings before interest and taxes (EBIT) × (1 - T)] +
Depreciation (T=.34%)
OCF = (42000000-26460000-1621000-800000) x (1 – T) +
Depreciation
OCF = 13119000 x (1 - .34) + 800000
OCF = 9458540
Now that we have the OCF we can solve for the FCF
FCF = OCF – Capital Expenditures + Depreciation –
Networking Capital
FCF = 9458540 – 2932000 – (4530181-190000-150000)
FCF = 9458540 – 2932000 – 4190181
FCF = 2336359
Jaeden’s free cash flow is 2336359
Jaeden’s Liquidity](https://image.slidesharecdn.com/assignment1chapter2minicasefinancial-221017183926-f54ff2a4/85/Assignment-1-Chapter-2-Mini-Case-Financial-docx-2-320.jpg)
Assignment 1 Chapter 2 Mini Case Financial .docx
- 1. Assignment 1: Chapter 2 Mini Case: “Financial Statement and Cash Flow Analysis” In the mini case in our textbook we were given an account balance sheet for Jaeden Industries as of December 31, 2010 along with their income statement and balance sheet from the previous year. It also stated that the firm’s dividend payout ratio is 25% and the tax rate is 34%. The firm’s stock price on December 31, 2009, was $ 42.89 and on December 31, 2010, it was $ 56.82. In part A of our assignment it asks us to use the financial statements in the text to determine Jaeden’s free cash flow, liquidity, debt and profitability ratios, and market ratios
- 2. for year 2010. Part A Jaeden’s Free Cash Flow The measure of free cash flow (FCF) is the amount of cash flow available to investors; the providers of debt and equity capital. It represents the net amount of cash flow remaining after the firm has met all operating needs and has made all required payments on both long- term (fixed) and short- term (current) investments (Graham, Megginson, Smart pg. 34). However, in order to determine the free cash flow you have to obtain the operating cash flow (OCF), which are cash inflows and outflows directly related to the production and sale of products or services. OCF = [Earnings before interest and taxes (EBIT) × (1 - T)] + Depreciation (T=.34%) OCF = (42000000-26460000-1621000-800000) x (1 – T) + Depreciation OCF = 13119000 x (1 - .34) + 800000 OCF = 9458540 Now that we have the OCF we can solve for the FCF FCF = OCF – Capital Expenditures + Depreciation – Networking Capital FCF = 9458540 – 2932000 – (4530181-190000-150000) FCF = 9458540 – 2932000 – 4190181 FCF = 2336359 Jaeden’s free cash flow is 2336359 Jaeden’s Liquidity
- 3. Our textbook states that liquidity ratios measure a firm’s ability to satisfy its short-term obligations as they come due. Current ratio and quick ratio are two measures of liquidity. Current Ratio is defined as current assets divided by current liabilities and it is used to measure a firm’s ability to meet short-term obligations. Current assets include cash, marketable securities, accounts receivable, and inventory. Current liabilities include accounts payable, notes payable, and accruals. Quick ratio is somewhat similar except it excludes a certain asset that is, inventory. Inventory turnover provides a measure of how quickly a firm sells its goods (Graham, Megginson, Smart pg. 43). Inventory turnover can be converted into average age turnover simply by dividing the turnover figure by the amount of days in a year. Current Ratio = Current Assets / Current Liabilities Current Ratio = (3689000 + 5423000 + 1836000 + 4118000) / (3136000 + 706000 + 500000) Current Ratio = 15066000 / 4342000 Current Ratio = 3.469829572 Quick Ratio = Current Assets – Inventory / Current Liabilities Quick Ratio = (3689000 + 5423000 + 1836000) – 4118000 / (3136000 + 706000 + 500000) Quick Ratio = (10948000 – 4118000) / (3136000 + 706000 + 500000) Quick Ratio = 2.521418701 Inventory Turnover = Cost of Goods Sold (COGS) / Inventory Inventory Turnover = (42000000 x .63) / 4118000 Inventory Turnover = 26460000 / 4118000 Inventory Turnover = 6.425449247 Average Age Turnover = 365 / 6.425448247 Average Age Turnover = 56.80536659
- 4. Jaeden’s Debt and Profitability Ratios In the previous equations, we dealt with current assets and current liabilities. However now, we will deal with total assets and total liabilities. Total assets include current assets plus fixed assets minus accumulated depreciation. To get the total liabilities, we will use their current liabilities plus their long-term debt. In this section, we will be determining Jaeden’s debt ratio, debt-to-equity ratio, assets-to- equity ratio, and times interest earned for the year 2010. The debt ratio measures the proportion of total assets financed by the firm’s creditors. To obtain the debt ratio, you would divide total liabilities by total assets. Assets-to-equity ratio is a measurement of the proportion of total assets financed by a firm’s equity. It is calculated as total assets divided by common stock equity. It is an alternative measure that focuses solely on the firm’s long- term debt is the debt-to- equity ratio. Debt-to- equity ratio is calculated as long-term debt divided by stockholder’s equity. The times interest earned ratio measures the firm’s ability to make contractual interest payments. Times interest earned equals earnings before interest and taxes (EBIT) divided interest expense (Graham, Megginson, Smart pg. 45). Debt Ratio = Total Liabilities / Total Assets Debt Ratio = 4342000 + 3046000 /15066000 + (14811000 – 5160000) Debt Ratio = (7388000 / 24717000) x 100 Debt Ratio = 29.89035886
- 5. Assets-to-equity Ratio = Total Assets / Common Stock Equity (common stock, paid-in capital excess, and retained earnings) Assets-to-equity Ratio = 24717000 / (4000000 + 4500000 + 1628819) Assets-to-equity Ratio = (24717000 / 10128819) Assets-to-equity Ratio = 2.440264753 Debt-to-equity ratio = Long-term debt / Stockholder’s equity (common stock equity plus preferred stock) Debt-to-equity ratio = (3046000) / (10128819 + 100000) x 100 Debt-to-equity ratio = 29.77860885 Time interested earned = EBIT / Interest Paid (.10%) Time interested earned = 13119000 / 1311900 Time interested earned = 10 Jaeden’s Market Ratios Market ratios relate the firm’s market value, as measured by its current share price, to certain accounting values. These ratios provide insight into how investors think the firm is performing, and they also reflect the common stockholders’ assessment of the firm’s past and expected future performance (Graham, Megginson, Smart pg. 49). The market tends to focus two which are the price/earnings (P/E) ratio and the market/book (M/B) ratio. The price/ earnings (P/ E) ratio measures the amount investors are willing to pay for each dollar of the firm’s earnings. The market/book ratio relates the market value of the firm’s shares to their book value. Price/earnings (P/E) ratio = Market price per share of common stock / Earnings per share Price/earnings (P/E) ratio = 56.82 / 7.79 Price/earnings (P/E) ratio = 7.293966624 Market/book ratio = Market Value per share of common stock /
- 6. Book value per share of common stock Market/book (M/B) ratio = 56.82 / (10128819 / 100000) Market/book (M/B) ratio = 56.82 / 10.128819 Market/book (M/B) ratio = 5.609735943 Part B In this part of the assignment, we will look at the strengths and weaknesses of Jaeden’s Industries. There was an increase in Jaeden’s earnings per share from 2009 to 2010. This shows that they earned more in 2010 on each outstanding share of common stock. The higher the operation profits margin, the better and, in this case, their profit margin was much higher in 2010 than 2009. This was also the case with their gross margin profit. The increase in their sales was also a great thing for their industries. The above statements are a few of Jaeden’s strengths. Times interested earned ratio is an area that they could improve in. Instead of this number increasing it actually dropped. The higher this number indicates a greater capacity for them to meet scheduled payments. Another weak area is their inventory balance turnover. Jaeden’s Industries has to figure out a way to lower its balance turnover instead of increasing it.
- 7. Reference Graham, J. R., Smart, S. B., & Megginson, W. L. (2010). Corporate finance. Australia: South-Western Cengage Learning.
- 8. Writing Assignment #4: Reflective Essay Introduction: Now that you are nearing the completion of WRTG 101, you have reached a time when it can be useful to you to reflect and evaluate your learning experience. In a fast-paced course such as this one, you have worked hard and quickly to complete your assignments according to the instructions given to you. Now is the opportunity for you to consider the experiences you had had in writing throughout this course and how those experiences might be useful to you in future courses. This assignment asks you to reflect and consider the work you have done, how successfully you feel you have completed it, and how the skills and strategies you have learned in completing this work may help you in your future studies. Since this assignment is reflective and self-evaluating, using “I, me, my” should be acceptable as you write this essay. The Assignment: This assignment calls for you to write an essay of 800-1000 words, double spaced. The essay should have the following academic essay elements:
- 9. • a clear introduction, body, and conclusion • a clearly identifiable thesis statement in the introduction • evidence based upon your recollections and any material from the course (whether from the texts, the online resources, the course modules, the feedback to drafts, or the conference topics) that you might find relevant to mention in your discussion Length and Format: The essay should be 800-1000 words In addition, the paper should be formatted according to APA style in accordance with the video tutorial you observed in class, How to format your paper according to APA style. • Use one-inch margins. • Double space. • Use size 12 Times New Roman font. • Include a running head. • Include page numbers. • Include a title page. • An abstract is not required. Possible approaches for the reflective essay in WRTG 101:
- 10. On the following two pages, you will see descriptions of two examples of approaches you can take in your reflective essay. Each approach has three (3) parts. Be sure that you understand clearly what is expected of you. If you have questions, be sure you ask your instructor. You should choose only one of these tasks, and you may not choose any other topic. Approach One: Self-Evaluating Your Research Essay Assignment What You Must do: In this essay, you will evaluate your work on the research essay assignment. Your purpose is to evaluate whether you chose wisely in selecting your topic for research writing, if you used your research successfully, and how well you believe you completed the assignment. How You Might Do This: Since your essay uses a traditional structure for academic writing, you could try the following technique: 1. Decide what your thesis should say and design your introduction to lead to your thesis. The thesis might begin with a phrase such as, “My research
- 11. essay turned out successfully because…” or “My research assignment became problematic due to….” Your introduction can, of course, briefly describe your assignment. 2. Describe and analyze the following in the body of your essay: a. your topic and why you chose it (this should go beyond mere interest and consider whether you thought carefully enough about the research potential/problems your topic posed); b. how/why you made research material decisions and conducted research in the manner you did. In this section, you will want to comment on the databases you searched on in the UMUC Information and Library Services interface. You might also comment on key words on which you searched, new key words you came up with during your searches, and your experience in retrieving full-text articles. c. how your process worked out as you completed it. In this analysis, please account for both successes and difficulties. 3. Discuss your reflection and future application in the conclusion of your essay. You will want to bothreflect on what you have discussed and look towards future research assignments. You will explain how the lessons you learned from this assignment can help you correct flaws you feel you had in your process and can remind you of good
- 12. practices you followed that can make future research projects successful. You should also give yourself a “grade” on, not the essay itself, but on your research process and experience. Approach Two: Reflecting on Your Experiences Throughout the Eight Weeks: What You Must Do: In this essay, you will evaluate your learning experience in WRTG 101. Your purpose is to estimate where you think your writing skills were when you began the course and, by examining the work you did in WRTG 101, determine as best you can the skills that this course helped you learn and develop. How You Might Do This: Since your essay uses a traditional structure for academic writing, you could try the following technique: 1. Think of your thesis as a “then and now” proposition. Your essay’s introduction can offer readers a brief look at why you took WRTG 101 and lead to a thesis statement that begins with a phrase such as “I began WRTG 101 with “X” writing skills; now I…”
- 13. 2. Discuss when/where/why you learned particular skills. Remembering how you completed assignments as well as any materials you find in the classroom that you think are relevant (these can come from Course Content, conferences, the texts, the online resources, the Course Modules, the feedback you received on drafts of essays, the discussions in the classroom areas, etc.), discuss when/where/how/why you learned particular skills that helped you complete assignments successfully and increase your writing skill set. In analyzing your acquisition of skills, it will be helpful to consider the course outcomes for WRTG 101. They are as follows: • apply the writing process to develop essays using various rhetorical patterns in order to inform and persuade an audience • construct unified, coherent, and well-supported paragraphs using principles of persuasion and exposition • demonstrate accurate grammar and mechanics in writing • analyze source material in order to integrate valid and reliable sources using accepted documentation style In writing this section of the essay, please be specific. You might refer to specific grammatical issues (outcome #3) and the process of developing
- 14. a topic (outcome #1). Or you might refer to challenges you had in writing paragraphs (outcome #2) and how the development of the paragraphs caused you to evaluate your thesis (outcome #1). These are just some suggestions to help you develop your points that you want to make for your essay. Do not be afraid to discuss any areas in which you felt you did not achieve as much as you would have liked to or wish you could have had more instruction or practice. This information will be very helpful to your instructor. 3. In your conclusion, consider the skills you feel you are taking away from WRTG 101 and how these skills will help you in future courses you take. Consider also areas you think you will want to continue to try to improve. Writing Assignment #4: Reflective EssayThe Assignment:Length and Format:Possible approaches for the reflective essay in WRTG 101:Approach One: Self-Evaluating Your Research Essay AssignmentApproach Two: Reflecting on Your Experiences Throughout the Eight Weeks: