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Microsoft Word - FINANCE PGE 2 Gp Anglais-Sujet Groupe Apprenti Finance -4- Final Exam EXERCICE 2 (6 POINTS) As a Financial Analyst employed by Fidelity Investments, you are evaluating the balance...

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Microsoft Word - FINANCE PGE 2 Gp Anglais-Sujet Groupe Apprenti


Finance -4- Final Exam
EXERCICE 2 (6 POINTS)
As a Financial Analyst employed by Fidelity Investments, you are evaluating the balance sheet
for Lucas Film Corp. (LFC), an American film and television production company. From the
alance sheet, you obtain the following balances at the end of the year 2010: Cash and
marketable securities = €50,000, Accounts receivable = €800,000, Inventory = €1,200,000,
Accrued liabilities = €400,000, Accounts payable = €900,000, and Notes payable = €600,000.

Question 1. (4 points) Calculate Lucas Film’s Cu
ent ratio, Quick ratio, and Cash ratio.
Comment these three financial ratios as regards to the liquidity achieved by Lucas Film in 2010. -------------------------------------------------------------------------------------------------
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Finance -5- Final Exam
Mendeza Ltd. has cu
ent liabilities = €5 million, cu
ent ratio = 2 times, inventory turnover
atio = 12 times, average collection period for receivables = 30 days, and sales = €40 million.
No Value Added Tax (VAT) is charged for both purchases and sales.
Question 2. (2 points) Calculate the value of accounts receivable. -------------------------------------------------------------------------------------------------
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Finance -6- Final Exam
EXERCICE 3 (10 POINTS)
K-L Fashions is a garment manufacturing company specialized in the manufacturing of coated
denim and premium jeans serving an a
ay of prestigious companies: H&M, John Lewis, Zara.
K-L Fashions operates in India and a VAT rate of 20% is charged for both purchases and sales.


K-L Fashions, Inc. Financial Statements
Income Statement
For the year ended December 31:
(Euros in thousands)

2015

2014

2013
Net Sales €6,039,750 €5,452,010 €4,558,060
Cost of Goods (Purchases of Materials) 3,573, XXXXXXXXXX,135,730 2,616,710
Gross Profit 2,466, XXXXXXXXXX,316,280 1,941,350

Selling, General and Administrative
Expenses (including depreciation)

2,221,540

1,849,100

1,434,860

Income from Operations

XXXXXXXXXX,140

XXXXXXXXXX,180

XXXXXXXXXX,490
Other Income (expenses):
Interest and other income XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,250

Interest Expense XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,320)

Profit Before Income Taxes

XXXXXXXXXX,430

XXXXXXXXXX,700

XXXXXXXXXX,420

Profit Tax Provision

XXXXXXXXXX,000

XXXXXXXXXX,990

XXXXXXXXXX,600

Net Profit

€147,430

€290,710

€322,820




K-L Fashions, Inc. Financial Statements
Statement of Cash Flows
(Major component totals only)
For the year ended December 31:

(Euros in thousands)
XXXXXXXXXX
Net cash flows from
operating activities
€ 512,020 € 95,200 € 255,600
Net cash flows from
investing activities
€ (175,410) € (250,560) € (226,690)
Net cash flows from
financing activities
€ (146,510) € (83,490) € 10,730
Net increase (decrease) In
cash and cash equivalents
€ 190,100 € (238,850) € 39,640



Finance -7- Final Exam

K-L Fashions, Inc. Financial Statements
Balance Sheet
December 31:

(Euros in thousands)

2015

2014

2013
ASSETS
Fixed assets (at cost):
Land and Buildings XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,670
Fixtures and equipment XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,920
Leasehold improvements XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,340
Construction in progress XXXXXXXXXX XXXXXXXXXX, XXXXXXXXXX,800
Less Accumulated Depreciation XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,020)
Fixed asset, net value XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,710 Cu
ent Assets:
Cash and Cash Equivalents €272,640 €82,540 €321,390
Accounts Receivable XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,550
Inventory XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,200
Prepaid Expenses XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,670
Total Cu
ent Assets 1,078, XXXXXXXXXX,140 1,036,810

TOTAL ASSETS €1,854,000 €1,669,320 €1,511,520

Common shares, issued at par XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,000
Additional Capital, net XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,080
Retained Earnings XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,400
Less Treasury Stock, at cost XXXXXXXXXX, XXXXXXXXXX,9 XXXXXXXXXX0
Total Stockholders’ Equity 1,168,260 1,146, XXXXXXXXXX,480

Long-Term Debt

XXXXXXXXXX,000

XXXXXXXXXX,130

XXXXXXXXXX,740

Notes Payable

XXXXXXXXXX,800

XXXXXXXXXX,020

XXXXXXXXXX,970
Accounts Payable XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,790
Total Cu
ent Liabilities XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,300


TOTAL LIABILITIES AND EQUITY

€1,854,000

€1,669,320

€1,511,520
















Finance -8- Final Exam
Question 1. (4 points) Using the balance sheet and the income statement of K-L Fashions, Inc.,
calculate the following ratios for K-L Fashions, Inc. as of year-end 2015.
a) Gross profit margin
) Cu
ent and Quick (or Acid-Test) ratio
c) Days’ sales in inventory and days’ accounts receivable ratio
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Finance -9- Final Exam
Question 2. (2 points) Comment the ratios that you have obtained in Question 1 and compare them
to the industry ratios (figured out in the below table) in order to assess the liquidity and the efficiency
of K-L Fashions Inc.

Industry benchmark
Cu
ent ratio XXXXXXXXXXtimes
Quick ratio XXXXXXXXXXtimes
Cash ratio XXXXXXXXXXtimes
Days’ sales in inventory XXXXXXXXXXdays
Days’ accounts receivable ratio 31.5 days
Days’ accounts payable ratio 38 days
Debt-to-equity ratio XXXXXXXXXXtimes
Equity
exam-2017-2018-pages-3-9-q0j0tv5q.pdf
Answered Same Day Nov 24, 2021

Solution

Kushal answered on Dec 02 2021
144 Votes
As a Financial Analyst employed by Fidelity Investments, you are evaluating the balance sheet for Lucas Film Corp. (LFC), an American film and television production company. From the balance sheet, you obtain the following balances at the end of the year 2010: Cash and marketable securities = €50,000, Accounts receivable = €800,000, Inventory = €1,200,000,
Accrued liabilities = €400,000, Accounts payable = €900,000, and Notes payable = €600,000.
Question 1. (4 points) Calculate Lucas Film’s Cu
ent ratio, Quick ratio, and Cash ratio. Comment these three financial ratios as regards to the liquidity achieved by Lucas Film in 2010.
Cu
ent Assets = Cash and marketable securities+ Accounts receivable+ Inventory
     = 50,000 + 800,000 + 1,200,000
         = 2,050,000
Cu
ent Liabilities = Accrued liabilities + Accounts payable + Notes payable
     = 400,000 + 900,000 +600,000
         = 1,900,000
Cu
ent ratio = Cu
ent Assets / Cu
ent Liabilities
     = 2,050,000 / 1,900,000 = 1.0789
Quick ratio = (Cu
ent Assets – Inventories) / Cu
ent Liabilities
     = (2,050,000 - 1200000) / 1,900,000
     = 0.4473
The quick ratio of the firm is moderately low and needs to keep more cu
ent investments to keep the operations of the firm going in any adverse events.
The quick ratio does not consider the inventory into account.
Cash ratio = (Cu
ent Assets – Inventories – Account Receivables) / Cu
ent Liabilities
     = (2,050,000 – 1,200,000 – 800,000) / 1,900,000
     = 0.0263
The cash ratio of the firm is significantly low and needs to keep more cash and marketable securities to avoid...
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