Week Five Exercise Assignment

Financial Ratios

1.  Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10:

Edison	Stagg	Thornton
Cash	$6,000	$5,000	$4,000
Short-term investments	3,000	2,500	2,000
Accounts receivable	2,000	2,500	3,000
Inventory	1,000	2,500	4,000
Prepaid expenses	800	800	800
Accounts payable	200	200	200
Notes payable: short-term	3,100	3,100	3,100
Accrued payables	300	300	300
Long-term liabilities	3,800	3,800	3,800

1. Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why?

2.  Computation and evaluation of activity ratios. The following data relate to Alaska Products, Inc:
	20X5	20X4
Net credit sales	$832,000	$760,000
Cost of goods sold	530,000	400,000
Cash, Dec. 31	125,000	110,000
Average Accounts receivable	205,000	156,000
Average Inventory	70,000	50,000
Accounts payable, Dec. 31	115,000	108,000
Instructions a.  Compute the accounts receivable and inventory turnover ratios for 20X5. Alaska rounds all calculations to two decimal places.

3. Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The com­pany reported the following information for 20X7:

Net sales	$1,750,000
Interest expense	120,000
Income tax expense	80,000
Preferred dividends	25,000
Net income	130,000
Average assets	1,200,000
Average common stockholders’ equity	500,000

1. Compute the profit margin on sales ratio, the return on equity and the return on assets, rounding calculations to two decimal places.
2. Does the firm have positive or negative financial leverage? Briefly ex­plain.

4.  Horizontal analysis. Mary Lynn Corporation has been operating for several years. Selected data from the 20X1 and 20X2 financial statements follow.
20X2	20X1
Current Assets	$86,000	$80,000
Property, Plant, and Equipment (net)	99,000	90,000
Intangibles	25,000	50,000
Current Liabilities	40,800	48,000
Long-Term Liabilities	153,000	160,000
Stockholders’ Equity	16,200	12,000
Net Sales	500,000	500,000
Cost of Goods Sold	322,500	350,000
Operating Expenses	93,500	85,000
a.  Prepare a horizontal analysis for 20X1 and 20X2. Briefly comment on the results of your work.

5.Vertical analysis. Mary Lynn Corporation has been operating for several years. Selected data from the 20X1 and 20X2 financial statements follow.

20X2	20X1
Current Assets	$86,000	$80,000
Property, Plant, and Equipment (net)	99,000	80,000
Intangibles	25,000	50,000
Current Liabilities	40,800	48,000
Long-Term Liabilities	153,000	150,000
Stockholders’ Equity	16,200	12,000
Net Sales	500,000	500,000
Cost of Goods Sold	322,500	350,000
Operating Expenses	93,500	85,000

a.  Prepare a vertical analysis for 20X1 and 20X2. Briefly comment on the results of your work.

6. Ratio computation. The financial statements of the Lone Pine Company follow.
LONE PINE COMPANY
Comparative Balance Sheets
December 31, 20X2 and 20X1 ($000 Omitted)
20X2	20X1
Assets
Current Assets
Cash and Short-Term Investments	$400	$600
Accounts Receivable (net)	3,000	2,400
Inventories	3,000	2,300
Total Current Assets	$6,400	$5,300
Property, Plant, and Equipment
Land	$1,700	$500
Buildings and Equipment (net)	1,500	1,000
Total Property, Plant, and Equipment	$3,200	$1,500
Total Assets	$9,600	$6,800
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts Payable	$2,800	$1,700
Notes Payable	1,100	1,900
Total Current Liabilities	$3,900	$3,600
Long-Term Liabilities
Bonds Payable	4,100	2,100
Total Liabilities	$8,000	$5,700
Stockholders’ Equity
Common Stock	$200	$200
Retained Earnings	1,400	900
Total Stockholders’ Equity	$1,600	$1,100
Total Liabilities and Stockholders’ Equity	$9,600	$6,800
LONE PINE COMPANY
Statement of Income and Retained Earnings
For the Year Ending December 31,20X2 ($000 Omitted)
Net Sales*	$36,000
Less: Cost of Goods Sold	$20,000
Selling Expense	6,000
Administrative Expense	4,000
Interest Expense	400
Income Tax Expense	2,000	32,400
Net Income	$3,600
Retained Earnings, Jan. 1	900
Ending Retained Earnings	$4,500
Cash Dividends Declared and Paid	3,100
Retained Earnings, Dec. 31	$1,400
*All sales are on account.

Instructions

Compute the following items for Lone Pine Company for 20X2, rounding all calcu­lations to two decimal places when necessary:

a. Quick ratio

b. Current ratio

c. Inventory-turnover ratio

d. Accounts-receivable-turnover ratio

e. Return-on-assets ratio

f. Net-profit-margin ratio

g. Return-on-common-stockholders’ equity

h. Debt-to-total assets

i. Number of times that interest is earned

Week_Five_Exercise_Assignment_B.docx 

Imagine that you are a financial manager researching investments for your client that align with its investment goals. Use the Internet or the Strayer Library to research any U.S. publicly traded company that you may consider as an investment opportunity for your client. (Note: Please ensure that you are able to find enough information about this company in order to complete this assignment. You will create an appendix, in which you will insert related information.)

The assignment covers the following topics:

• Rationale for choosing the company for which to invest
• Ratio analysis 
• Stock price analysis
• Recommendations

Write a ten to fifteen (10-15) page paper in which you:

1. Provide a rationale for the U.S. publicly traded company that you selected, indicating the significant factors driving your decision as a financial manager.
2. Determine the profile of the investor for which this company may be a fit, relative to that potential investor’s investment strategy. Provide support for your rationale.
3. Select any five (5) financial ratios that you have learned about in the text. Analyze the past three (3) years of the company’s financial data, which you may obtain from the company’s financial statements. Determine the company’s financial health. (Note: Suggested ratios include, but are not limited to, current ratio, quick ratio, earnings per share, and price earnings ratio.)
4. Based on your financial review, determine the risk level of the company from your investor’s point of view. Indicate key strategies that you may use in order to minimize these perceived risks.
5. Provide your recommendations of this stock as an investment opportunity. Support your rationale with resources, such as peer-reviewed articles or material from the Strayer Library.
6. Use at least five (5) quality academic resources in this assignment. Note: Wikipedia and other Websites to not qualify as academic resources.

Your assignment must follow these formatting requirements:

• Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
• Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

The specific course learning outcomes associated with this assignment are:

• Critique financial management strategies that support business operations in various market environments.
• Analyze financial statements for key ratios, cash flow positions, and taxation effects.
• Review fixed income strategies using time value of money concept, bond valuation methods, and interest rate calculations.
• Estimate the risk and return on financial investments.
• Apply financial management options to corporate finance.
• Determine the cost of capital and how to maximize returns.
• Formulate cash flow analysis for capital projects including project risks and returns.
• Evaluate how corporate valuation and forecasting affect financial management.
• Analyze how capital structure decision-making practices impact financial management.
• Design working capital management concepts to enhance tactical financial strategies.
• Use technology and information resources to research issues in financial management.
• Write clearly and concisely about financial management using proper writing mechanics.

The attachment has the rubric for this assignment. 
Week 10 Assignment 1 Rubric.webarchive

Based on the feedback you have received on your introduction paragraph, on gangs and violence begin writing a 1200 word rough draft of the body paragraphs of your research paper, which should have a clear focus, problems and solutions, and reliable/scholarly sources as support. You should currently have a good supply of research notes to bring into each of your arguments. Be sure your rough draft includes the following:

• An introduction that has been revised based on prior feedback
• Body paragraphs organized around focused analysis and supporting evidence for each of the key points that you are researching
• In-text citations and a reference page to document sources being used

3 reference

Intro 

Choose one topic:

• Research the state’s tort claims act where you reside. Illinois
• Research the Federal Tort Claims Act of 1946.

• Write a 1,200-word paper on the state’s tort claims act where you reside (Illinois) or on the Federal Tort Claims Act of 1946. Explain how it applies to local justice and to security agencies. What are the issues of risk related to civil liability as it applies to crime, justice, and security organizations?

APA 6th Edition Format. Please make the abstract, Introduction, and Conclusion very strong.