Accounting FALCONS INCORPORATED (IN MILLIONS)-
|
Assets
|
|
|
|
2013
|
2012
|
|
Cash and Marketable Securities
|
10
|
80
|
|
Accounts Receivable
|
375
|
315
|
|
Inventories
|
615
|
415
|
|
Total Current Assets
|
1,000
|
810
|
|
Net plant and equipment
|
1,000
|
870
|
|
TOTAL ASSETS
|
2,000
|
1,680
|
|
|
|
|
Liabilities and Equity
|
|
|
|
Accounts Payable
|
60
|
40
|
|
Notes Payable
|
140
|
60
|
|
Accruals
|
110
|
130
|
|
Total Current Liabilities
|
310
|
230
|
|
Long Tmn Bonds
|
754
|
580
|
|
TOTAL DEBT
|
1,064
|
810
|
|
Preferred Stock
|
40
|
40
|
|
Common Stock
|
130
|
130
|
|
Retained earnings
|
766
|
700
|
|
TOTAL COMMON EQUITY
|
896
|
830
|
|
TOTAL LIABILITIES AND EQUITY
|
2,000
|
1,680
|
|
|
|
|
Income Statement: 12/31104
|
2013
|
2012
|
|
Net Sales
|
3,200
|
2,850
|
|
Operating Costs (excludes Dep/Amonization
|
2,700
|
2,497
|
|
EBITDA
|
500
|
353
|
|
Depreciation
|
100
|
90
|
|
Amortization
|
0
|
0
|
|
Depreciation and Amortization
|
100
|
90
|
|
EBIT
|
400
|
263
|
|
Less Interest
|
88
|
60
|
|
EBT
|
312
|
203
|
|
Taxes (40%)
|
124.8
|
81.2
|
|
NET INCOME (before Preferred Dividends)
|
187.2
|
121.8
|
|
Preferred Dividends
|
4
|
4
|
|
NET INCOME
|
183.2
|
117.8
|
|
Common Dividends
|
117
|
53
|
|
Addition to Retained Earnings
|
66.2
|
64.8
|
1. You are a potential investor of Falcons Incorporated and was given the financial statements of the company for the year ended 2012 and 2013. Evaluate the financial status of the company in terms of its liquidity, solvency, structure and profitability. Use your comprehensive analysis to decide whether it would be a wise decision to invest in the company or not. You can make use of various tools in financial analysis such as horizontal (increase-decrease method), vertical (common size financial statement), and financial ratio analysis.
2. The company provides Preferred and Common Stocks to stockholders. Which among the two would be better to invest in? Discuss comprehensively the factors that you will consider in choosing the type of stock that you will invest in.