(Note that questions sometimes continue on the next page)
Use a spreadsheet program such as Excel for computations for all cases
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?
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