Strategic Quantitative Financial Analysis

Question #1-StrategicQuantitativeFinancial Analysis

Last year Swensen Corp. had sales of$303,225, operating costs of $267,500, and year-end assets of $195,000. The debt-to-total-assets ratio was 27%, the interest rate on the debt was 8.2%, and the firm's tax rate was 37%. The new CFO wants to see how the Return on Equity (ROE) would have been affected if the firm had used a 45% debt ratio. Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant. By how much would the ROE change in response to the change in the capital structure?

Question #2-FinancialStatement Interpretation

Please take the company you have chosen in Case #1 and perform a Financial Analysis using the available data for the most recent fiscal year (i.e. 12/31/16) and compare that year to the previous fiscal year (i.e. 12/31/15). If 12 /31/16 is not available take the quarter ended 09/30/16.

Your analysis should include at least one analytical equation from each of the five sections of Financial Analysis given in Chapter 3 and detailed _on Page 112 of your text.

• Liquidity
• Asset Management
• Debt Management
• Profitability
• Market Value

In your analysis should include the following interpretations:

1. Has the firm improved its' performance from the previous year?
2. Is the firm managed efficiency?
3. As a potential investor would you consider this a stock you would purchase?

Question#3-FinancialForecastingStrategy

Pleaseseeattached.

Question 3

	2015	2016
Year-cod commonstockprice	$22.50	$7.45
Year-endsharesoutstanding	100,000	250,000
Taxrate	40'l'o	40%

Balance Sheets Assets 2015 2016 Cashaod equivalents $7,282 $14,000 Short-term investments $20,000 $71,632 Accounts receivable $632,160 $878,000 Inventories $1,287,360 $1,716 480 Totalcurrentassets $1,946,802 $2,680,112 Gross Fixed Assets $1,202,950 $1,220,000 Less AccumulatedDep. $263160 $383,160 NetFixed Assets $939,790 $836,840 TotalAssets $2,886,592 $3,516,952 Liabilitiesandequity Accountspayable $324,000 $359,800 Notespayable $720,000 $300,000 Accruals $284,960 $380,000 Total current liabilities $1,328,960 $1,039,800 Long-term bonds $1000,000 $500000 Total liabilities $2,328,960 $1,539,800 Common stock $460,000 $1,680,936 Retainedearnings $97 632 $296,216 Totalcommon equity $557 632 $1977152 Total liabilitiesandequity $2,886,592 $3,516,952

Prepare the following:Question 3).

2016Financial Forecasting:Additional Funds Needed

Thefirmis planningona15%increase in salesfor2017.

withtheProfit Marginremaining thesame percentage as 2016

andtheDividendPayoutRatethesameat21.70%for2016,thefirmisforecastinganAFNof$188,233for2017.

Howcanthefirmreducethisneedforexternalcapitalfor2017?Whatstrategiescan be used to reduce the need for external fundsandthefirmtobeentirelyinternallyfinancedfor2017?

Income Statements
	2015	2016
Net sales	$5,834,400	$7,035,600
Costs of Goods Sold	$4,980,000	$5,800,000
OtherExpenses	$720,000	$612,960
Depreciation	$116960	$120000
TotalOperatingCost		$5,816,960	$6,532,960
Earningsbeforeinterestand taxes (EBIT)	$17,440	$502,640
Lessinterest	Sl76,000	$80,000
Earnings beforetaxes(EBT)	($158,560) ($63,424)	$422,640 $169056
Taxes (40%)
NetIncome		($95,136)	$253,584
Dividends PerShare	$0.110	$0.220