Analysis 2 Homework

Name: ________________________

Assignment

1. Select what will be the most correct calculation of retained earnings for next year.

( ) Add next year's gross income to this year's retained earnings.
( ) Add next year's net income to this year's retained earnings.
( ) Add next year's net income minus dividends paid to this year's retained earnings.

2. Chester has a leverage of 1.91 This means that: (Assume leverage is calculated as Assets/Equity)

( ) $1.91 of assets is funded with $1.00 of equity and $0.91 of debt.
( ) $1.91 of assets is funded with $1.00 of debt and $0.91 of equity.
( ) Assets are funded with 91% debt.
( ) Assets are funded with 91% equity.

3. Given Baldwin Corporation’s Q2 balance sheet, compute the missing balance sheet amounts:

Cash $12,277,000
Accounts Receivable $7,409,000
Inventory $0
Plant & Equipment $126,360,000
Accumulated Depreciation ($46,830,000)
Accounts Payable $5,109,000
Current Debt $14,263,000
Long Term Debt $48,887,000
Common Stock $17,352,000
Retained Earnings $13,604,000
Market Cap $27,657,000

      Current Assets -?
      Current Liabilities -?
      Total Equity -?
      Total Assets -?

4. The Digby Corporation reports the following summaries in this partial Income Statement. Compute the missing values:

Sales $138,058,000
Labor Costs $16,529,000
Depreciation $6,485,000
Total Variable Costs $95,286,000
Admin. Costs $1,200,000
Other (unusual income or expenses) $378,000
Total Period Costs $23,146,000
EBIT $17,628,000
Interest $8,463,000
Taxes $3,208,000
Long Term Interest $6,727,000

      Contribution Margin -?
      Net Margin - ?
      Net Profit -?

5. The product manager for Baldwin's Bead product is comparing her product to Chester's Cedar product, in terms of reliability costs between the two. If it costs $0.30 per 1000 hours of MTBF, what is the difference in reliability cost per unit?

6. Demand is created through meeting customer buying criteria, credit terms, awareness (promotion) and accessibility (distribution). According to the Traditional segment's customers, which of these products was the most competitive at the end of last year?

7. Coat is a product of the Chester company. Chester starts to create their sales forecast by assuming all policies (R&D, Marketing, and Production) for all competitors are equal this year over last. For this question assume that all units of Coat are sold in the Performance segment. If the competitive environment remains unchanged what will be the Coat product’s demand next year (in 000’s)?

8. Your company acquires inventory on account (i.e. it owes the money).  Select the impact on your financial statements.

( ) Increasing assets only.
( ) Increasing assets and liabilities.
( ) Increasing liabilities only.
( ) Increasing liabilities and decreasing assets

9. Which description best fits Ferris's strategy? For clarity:

- A differentiator competes through good designs, high awareness, and easy accessibility.
- A cost leader competes on price by reducing costs and passing the savings to customers.
- A broad player competes in all parts of the market.
- A niche player competes in selected parts of the market.

Deliverables

1. Answers to the above problems