Asia Manufacturing Company

Asia Manufacturing Company

Group Case Analysis

MSM Intake 10

Asia Manufacturing Company is a real company (not the real name) that makes small electrical appliances for the home retail market, e.g. rice cookers, food processors. The company has been profitable, and expects to be profitable next year. Some additional information about the company’s operations follows.

The company expects sales to rise about 20% in 2007, and expects to incur costs of $3 million to close one of its manufacturing plants. These costs will be “one-time” expenses. The company’s long term debt calls for principal payments of $4 million to be paid each year. “Other expenses” are expected to be reduced by 90% with the closing of the manufacturing plant.

Attached you will find an Excel worksheet that contains the company’s income statements and balance sheets for the past few years. On the company’s 2007 income statement, you will see the sales forecast and some other numbers entered in blue. These are given numbers so do not change them.

Do not be concerned with foreign currency amounts, income taxes payable, or treasury stock for 2007 (all balance sheet amounts). These amounts are not needed to complete the requirements. You do not need to provide a complete balance sheet for 2007.

The requirements are as follows:

1. Calculate the 2006 liquidity, solvency and profitability ratios for this company. Do not compute dividend or per share ratios. I calculated the 2006 current ratio as an example of how this should be presented

2. Using the basic techniques we covered in our last session, provide an estimated income statement for 2007. Put your estimated amounts in the 2007 income statement column.

3. Estimate the following balance sheet amounts for 2007:

a. Accounts Receivable

b. Accounts Payable

c. Inventory

4. Show the total amount of the company’s long term debt (assume no additional borrowing) in 2007, and show...