Case Studies Fi4020

Topics: Balance sheet, Generally Accepted Accounting Principles, Income statement Pages: 8 (2616 words) Published: September 26, 2012
Case Preparation Questions

(Note that questions sometimes continue on the next page)

Use a spreadsheet program such as Excel for computations for all cases

Riley Supply

1. Prepare one indirect cash flow statement (operating-investing-financing) for 2004-2005 and a second one for 2005-2006. Do not aggregate any accounts. 2. Calculate common-size income statement for each year.

3. Calculate all financial ratios (use “A Basis Set of Financial Ratios”) for each year. You will always be expected to have all ratios and cash flows statements for all years of data. Coming to class without all if these completed means that you are unprepared for quizzes and class discussions. 4. Identify the major factors influencing Riley’s cash flow. Use the cash flow statements together with the ratios and common-size statements. 5. What is the length of Riley’s cash conversion cycle? Does it take a long time for Riley to go from spending cash to receiving cash? Why? 6. What are the implications of Riley’s cash flow for the financing needs of the firm?

Westmoreland Inc.

1. Examine the beginning financial statements (2005) and the pro forma statements (2006 projected) for Westmoreland (Exhibit 1). Do complete ration, common-size income statement and cash flow statement analyses with these data. The pro forma statements reflect management’s opinion about what will happen in the future. Incorporated into these statements is their business plan. 2. What is Westmoreland’s condition in 2005?

3. What are the key assumptions that are built into Westmoreland’s pro formas? At this point, do not focus on what did happen in the future. Concentrate on the past and what the company thought would happen. What was their business plan? 4. Now do a similar analysis for the beginning statements (2005, Exhibit 1) and the actual later financial statements (2006 actual, Exhibit 2). This reflects what actually did happen. What are the principal differences between Westmoreland’s actual financial developments and the planned developments? 5. To what are the differences attributable?

6. Is the loan to Westmoreland in better or worse shape than when the loan was first made?

California Choppers

1. Do the standard set of analytics: common-size income statements, cash flow statements, and financial rations for all years. 2. What was California Choppers’ condition in 2000? How has it changed over the six-year period? 3. Have all the company’s initiatives been successful?

4. How would you evaluate the human recourse aspects of the company?

Wiegandt GmgH Cologne

1. Although the case is titled Weigandt, it is really about two companies. Your analysis should be about Haefren Baum. Confine your work to Haefren Baum only-do not do Backhaus or Weigandt GmbH Cologne itself. 2. Analyze intensively the balance sheet and income statements of Haefren Baum using cash flow statements, common-size income statements (use net sales for all years), and ratio analysis. Also use net sales when sales are called for in a ratio. Land should be included as part of NFA in any ratio calculation. Identify the strengths and weaknesses of the company. Do not have to do any calculations or analysis for Backhaus. 3. There are a few unusual accounts. Due from stockholders is a loan by the business to stockholders. Earned surplus is the same thing as retained earnings. Exhibit 2 is an aging for Wiegandt’s accounts receivable to Haefren Baum and Backhaus. 4. How strong is the company's balance sheet? How about its income statement? Why? 5. What action should be taken by the credit department of Wiegandt GmbH Cologne?

Cartwright Lumber Company

1. Analyze Cartwright Lumber to identify its strengths and weaknesses (By now, you should know which analytical tools you should use so explicit requirements will no longer be specified. For you to be considered prepared for class, you must have done all...
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