Mini Case 7 Fina 4200

David McWaters

Alan Wolk

FINA 4200

September, 18th 2016

Chapter 7 Mini Case

1. Sales increases by $2.4 million. However, net income was negative in 2012. This is due to the total operating costs increasing by nearly $2.6 million, and the companies interest payment increasing by over 180%. In addition to this, the company’s net fixed assets nearly tripled in size.

Computron’s total assets nearly doubled compared to the 70% increase in sales they saw. This drastic increase in assets can be primarily tied to the sharp increase in the company’s inventory and accounts receivable.

The company’s liabilities overall saw a large uptick with the exception of their common stock, which stayed the same, and their retained earnings, which was less than half of the previous years retained earnings.

1. The net cash flow provided by operating activities was ($503,936), this was due to the negative income and the increase on working capital.

The firm barrowed a lot to be able to invest in their fixed assets. They spent of $700,000 on fixed assets, and firm took on long term debt and some short term debt to help finance their expansion.

Even though the company barrowed large sums of money, the company still saw a negative net cash change. This could be to the increase of interest payment.

1. FCF is the amount of cash available from operations for distribution to all investors (including stockholders and debtholders) after making the necessary investments to support operations.

A company’s value depends on the amount of FCF it can generate.

1. Pay interest on debt.
2. Pay back principal on debt.
3. Pay dividends.
4. Buy back stock.
5. Buy nonoperating assets (e.g., marketable securities, investments in other companies, etc.)

1. NOPAT = $125,460

Operating current assets are the current assets that are needed to support the operations of the business. This can include cash, inventory, and receivables.

Operating current liabilities are liabilities that are incurred due to a normal part of operations. These include accounts payable and accruals.