Assignment:
a. Use key financial ratios to determine what events occurred during 2017 to affect the
company’s financial position. Ratios are presented in the case packet reading “Financial Planning, Financial Ratios and Pro Forma Financial Statements” and in RWJ&J.
Be prepared to address at least the following questions:
Is the company growing (i.e., calculate the year–to–year growth rate of sales)?
Are receivables in control? (Calculate days sales outstanding (DSO) through
time.)
Is inventory in control? (Calculate days of inventory through time.)
Are payables being managed prudently (Note: See footnote a to the income
statements)?
Is the company’s debt usage in control?
Is cost of goods sold in control?
Are operating and administrative expenses in control?
Is the company profitable? Is profitability improving?
In addressing these questions, calculate the ratios for each year’s actual financial statements and for the forecast financial statements. In calculating ratios, use end–of–period balances except for profit ratios. (Use the beginning of year balance sheet data in calculating profit ratios.)
b. What implications do the deviations from plan and the general 2017 operating results have for the company and the bank? What financial strategies seem desirable during 2018? (Be especially aware of the implicit cost of trade credit.)
c. If you were WPS’s banker, what would you do?
