Question

Upon graduating from college in 2017, Karen Peterson entered the financial management-training program of a large financial consulting firm.

The training program consisted of a one-year assignment in three different departments. In the Investment and Financial Analysis department, Peterson was asked to answer the questions related to the Company. Using the financial statement and data below answer the following questions:

Financial Statement Data and Stock Price Data for Jays
	(All data as of fiscal year end; $ in millions)
Income Statement	2012	2013	2014	2015	2016
Revenue	404.3	363.8	424.6	510.7	604.1
Cost of Goods Sold	-188.3	-173.8	-206.2	-246.8	-293.4
Gross profit	216	190	218.4	263.9	310.7
Sales and Marketing	-66.7	-66.4	-82.8	-102.1	-120.8
Administration	-60.6	-59.1	-59.4	-66.4	-78.5
Depreciation & Amortization	-27.3	-27	-34.3	-38.4	-38.6
EBIT	61.4	37.5	41.9	57	72.8
Interest Income (Expense)	-33.7	-32.9	-32.2	-37.4	-39.4
Pretax Income	27.7	4.6	9.7	19.6	33.4
Income Tax	-9.7	-1.6	-3.4	-6.9	-11.7
Net Income	18	3	6.3	12.7	21.7
Shares outstanding (millions)	55	55	55	55	55
Earnings per share	$0.33	$0.05	$0.11	$0.23	$0.39
Balance Sheet	2012	2013	2014	2015	2016
Assets
Cash	48.8	68.9	86.3	77.5	85
Accounts Receivable	88.6	69.8	69.8	76.9	86.1
Inventory	33.7	30.9	28.4	31.7	35.3
Total Current Assets	171.1	169.6	184.5	186.1	206.4
Net Property, Plant & Equip.	245.3	243.3	309	345.6	347
Goodwill & Intangibles	361.7	361.7	361.7	361.7	361.7
	778.1	774.6	855.2	893.4	915.1
Liabilities & Stockholders' Equity
Accounts Payable	18.7	17.9	22	26.8	31.7
Accrued Compensation	6.7	6.4	7	8.1	9.7
Current Liabilities	25.4	24.3	29	34.9	41.4
Long-term Debt	500	500	575	600	600
Total Liabilities	525.4	524.3	604	634.9	641.4
Stockholders’ Equity	252.7	250.3	251.2	258.5	273.7
Total Liabilities & Stockholders' Equity	778.1	774.6	855.2	893.4	915.1
Statement of Cash Flows	2012	2013	2014	2015	2016
Net Income	18	3	6.3	12.7	21.7
Depreciation & Amortization	27.3	27	34.3	38.4	38.6
Chg. In Accounts Receivable	3.9	18.8	0	-7.1	-9.2
Chg. In Inventory	-2.9	2.8	2.5	-3.3	-3.6
Chg. In Payables & Accrued Comp	2.2	-1.1	4.7	5.9	6.5
Cash from Operations	48.5	50.5	47.8	46.6	54
Capital Expenditures	-25	-25	-100	-75	-40
Cash from Investing Activities	-25	-25	-100	-75	-40
Dividends Paid	-5.4	-5.4	-5.4	-5.4	-6.5
Sale (or purchase) of stock	0	0	0	0	0
Debt Issuance (Pay Down)	0	0	75	25	0
Cash from Financing Activities	-5.4	-5.4	69.6	19.6	-6.5
Change in Cash	18.1	20.1	17.4	-8.8	7.5
Jays Stock Price	$7.92	$3.30	$5.25	$8.71	$10.89

7 Suppose Jays had purchased additional equipment for $12 million at the end of 2013, and this equipment was depreciated by $4 million per year in 2014, 2015, and 2016. Given Jays tax rate of 35%, what impact would this additional purchase have had on Jay's net income in years 2013-2016?8 Suppose Jay's costs and expenses had been the same fraction of revenues in 2013-2016 as they were in 2012. What would Jay's EPS have been each year in this case?

8 Suppose Jay's costs and expenses had been the same fraction of revenues in 2013-2016 as they were in 2012. What would Jay's EPS have been each year in this case?

9 From 2012 to 2016, what was the total cash flow from operations that Jays generated?

Answer 1

7.

Financial Statement Data and Stock Price Data for Jays
(All data as of fiscal year end; $ in millions)
Income Statement	2012	2013	2014	2015	2016
Revenue	404.3	363.8	424.6	510.7	604.1
Cost of Goods Sold	-188.3	-174	-206	-247	-293.4
Gross profit	216	190	218.4	263.9	310.7
Sales and Marketing	-66.7	-66.4	-82.8	-102	-120.8
Administration	-60.6	-59.1	-59.4	-66.4	-78.5
Depreciation & Amortization	-27.3	-27	-38.3	-42.4	-42.6
EBIT	61.4	37.5	37.9	53	68.8
Interest Income (Expense)	-33.7	-32.9	-32.2	-37.4	-39.4
Pretax Income	27.7	4.6	5.7	15.6	29.4
Income Tax	9.695	1.61	1.995	5.46	10.29
Net Income (After adjustment)	18	3	3.705	10.14	19.11
Net Income (As per the given problem)	18	3	6.3	12.7	21.7

8.

(All data as of fiscal year end; $ in millions)
Income Statement	2012	Percentage for finding out expenses /cost of 2013-2016 based on the revenue as in 2012	2013	2014	2015	2016
Revenue	404.3		363.8	424.6	510.7	604.1
Cost of Goods Sold	-188.3	-46.57	-169.44	-197.75	-237.86	-281.36
Gross profit	216		194.36	226.85	272.84	322.74
Sales and Marketing	-66.7	-16.50	-60.02	-70.05	-84.25	-99.66
Administration	-60.6	-14.99	-54.53	-63.64	-76.55	-90.55
Depreciation & Amortization	-27.3	-6.75	-24.57	-28.67	-34.48	-40.79
EBIT	61.4		55.25	64.48	77.56	91.74
Interest Income (Expense)	-33.7	-8.34	-30.32	-35.39	-42.57	-50.35
Pretax Income	27.7		24.93	29.09	34.99	41.39
Income Tax	-9.70		-8.72	-10.18	-12.25	-14.49
Net Income	18.01		16.20	18.91	22.74	26.90
Shares outstanding (millions)	55		55	55	55	55
Earnings per share (after adjustment)	$0.33		$0.29	$0.34	$0.41	$0.49
Earnings per share (as per the given problem)	$0.33		$0.05	$0.11	$0.23	$0.39

9.Jays generated a total Cash Flow from Operation from 2012-2016 is $ 247.40 (48.5+50.5+47.8+46.6+54) .