To respond to the following questions, you will need to review the Quaker Cracker case study on pp. 242-244 of your textbook, Working Capital Management: Applications and Case Studies; the questions were adapted from the same section of the textbook. Respond in complete sentences as appropriate.
1. Part A: Using the data in exhibits C5.1 and C5.2, discuss how Quaker Cracker's results compare to its industry.
You will need to prepare a pro forma income statement (using the table in excel) before proceeding.
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Income Statement
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(in millions)
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Sales
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Cost of goods sold
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Gross profit
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Depreciation expense
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Advertising and selling expenses
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Profits before taxes
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Income Taxes
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Net income
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Current (times)
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Quick (times)
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Debt (%)
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Average collection period (days)
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Total asset turnover (times)
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Return on Equity (%)
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After entering the calculations in the table above, discuss specific metrics that can be used to analyze working capital performance. Type your two- to three-sentence response below.
2. Part A: Show changes to the 2012 pro forma balance sheet assuming the company borrows the necessary funds for the capital improvements at an interest rate of 7 percent. Ignore depreciation on the new equipment. Enter your calculations in the table provided below.
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Assets
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Calculations
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Liabilities and Owners' Equity
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Calculations
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Cash and Marketable Securities
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Notes payable
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Accounts Receivable
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Accounts payable
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Inventory
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Accrued expenses
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Current Assets
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Current liabilities
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Gross Fixed Assets
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Long-term debt
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Accumulated Depreciation
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Common Stock ($10 par)
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Net fixed assets
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Retained earnings
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Total assets
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Total liabilities and owners' equity
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Part B: Does this cause any significant change in the financials? Type your two- to three-sentence response below.
3. Play the role of a financial analyst and explain your recommended course of action. Type your three- to five-sentence response below.
4. The Cynsky family controls the company through its ownership of one half of the outstanding stock, with outsiders owning the balance. Should this influence McCabe's presentation of her recommendations? What arguments can you make in support of and against McCabe's position? Type your four- to five-sentence response below.
5. Why was the information provided in the second paragraph about competitive companies in the fancy food industry? Type your two- to four-sentence response.
Attachment:- Quaker Case - Financials.xlsx