The Paper Mill

Case 9 - Mark X Company

Topic - Financial Analysis and Forecasting

(also cited as Case 35 - these cases were selected from 100s of cases)

Omit 10.

1. 53-65. Please fill in Xs. Divide accounts by total assets in Table 1 to get Xs in Table 3 for 1992. Example: In Table 3 for 1992, accounts receivable = 30.55% = 29,357/96,102

Divide accounts by net sales in Table 2 to get Xs in Table 4 for 1992. Examples: In Table 4 for 1992, cost of goods sold = 166,837/195,732 = 85.24%; depreciation = 2,040/195,732 = 1.04%

Subtract accounts in 1992 from 1991 in Table 1 to get Xs in Table 5 for 1992. These are either increases/decreases (uses/sources) in cash. Example: in Table 5, increase in receivables = 29,357 (1992) - 18,462 (1991) = 10,895. For other numbers, add/subtract numbers in Table 5. Example: (Sales) 195,732 – 10,895 (increase in receivables) = 184,837 (cash sales).

For Table 6, see pages 58 and 61 for income statement and balance sheet examples. Example: In Table 6, current ratio = 79,922/45562 = 1.75 (see Table 1 for balance sheet), 87 and 103 in textbook; debt ratio - 93; total assets turnover - 91; return on total assets - 96

Altman Z factor - see casebook footnote d in Table 6- for 1992 as an example - .012 X (79922 - 45562) (net working capital = current assets - current liabilities) / 96102 + .014 X 15368 / 96102 + .033 X 4249/96102 + .006 X 3.67 X 3500 (12845 – see Table 1 in casebook - footnotes a and b - market value = market price of shares X shares) / 57465 + .999 X 195732/96102 = 2.97 (First 4 factors (X1-X4) are in % - move decimal 2 places to the right - ex. - .012 becomes 1.2)

See ratios in Chapter 4 in textbook

2. DuPont Equation – 100. 84-110 – Chapter 4 in textbook.

4. Fill in the Xs. Do income statement first. Fill in blanks in order that you can figure them out. I suggest you do them in the following order on the balance sheet: accounts receivable, inventory, short term bank loans, current liabilities, total liabilities,...