You recently joined a bank as an Account Officer in the Corporate Loans Department. The first task you have been assigned is to reconstruct the Balance Sheet for one of your clients,
NEWCO Inc. You have been provided with the following information.
NEWCO Inc.
Balance Sheet
As at December 31, 2004
Assets
Current Assets
Liabilities
Current Liabilities
Cash 600 Accounts Payable
Marketable Securities 207 Notes Payable
Accounts Receivable
Inventory
Total Current Assets
? Accrued salaries
? Total Current Liabilities
?
Long Term Debt
Plant & Equipment
Less Acc. Dep’n
2,786 Mortgage
470 Total Non-Current
Net Plant & Equipment 2316 Total Liabilities
Total Assets
Owner’s Equity
? Total Liabilities & Equity
NEWCO Inc.
Income Statement
Period Ending December 31, 2004
Sales Revenue ?
Cost of Goods Sold 21,265
Gross Profit ?
Ratio Analysis
Average Collection Period 36 days
Inventory Turnover 7.1 times
Debt Ratio
Current Ratio
40.43%
3.1
Quick Ratio
Gross Profit Margin
Fixed Asset Turnover
1.7
20.9%
11.61 times
?
500
540
?
1,000
?
5224
?

In this question, you are asked to complete the Balance Sheet and sales information for the
Fiske Company, using the financial data shown in the table below:
Assets
Fiske Company Ltd.
Balance Sheet
As at December 31, 2004
Liabilities & Owner’s Equity
Current Assets Current Liabilties
Cash
Accounts Receivable
Inventory
Total Current Assets
Fixed Assets
Plant & Equipment
Total Assets
Accounts Payable
Total Current Liabilities
Owner’s Equity
Common Stock
Retained Earnings
Total Owner’s Equity
Total Liabilities & Owner’s Equity
15,000
33,000
Fiske Company Ltd .
Income Statement
Period Ending December 31, 2004
Sales
Cost of Goods Sold
Gross Margin
Fiske Company Ltd.
Ratios
Debt/Equity Ratio
Quick Ratio
Total Asset Turnover
40%
1.72
2.0 times
Average Collection Period 30 days
Gross Profit Margin 30%
Inventory Turnover Ratio 4 times
Fixed Asset Turnover Ratio 12.7 times

You have recently joined a new bank in town as an Account Officer. Bruno, the collections officer, has asked that you extend a loan to his friend’s company, Semenco Industries.
Unfortunately, some of the numbers have been liquid papered out. However, you did find some ratios in the file that you think may help you to reconstruct the Balance Sheet and
Income Statement.
Semenco Industries Inc.
Balance Sheet
As at December 31, 2004
Liabilities & Owner’s Equity
Current Assets
Cash
Assets
1,000
Current Liabilties
Accounts Payable 641
Marketable Securities 364
Accounts Receivable
Inventory
Total Current Assets
Notes Payable
Accrued Expenses
Total Current Liabilities
Long Term Debt
Fixed Assets
Plant & Equipment 2,720
Mortgage
Total Liabilities
Less Depreciation 320
Net Plant & Equipment 2,400 Owner’s Equity
Total Assets
Total Liabilities & Owner’s Equity
518
2,800
Semenco Industries Inc.
Income Statement
Period Ending December 31, 2004
Sales Revenue
Cost of Goods Sold 24,000
Gross Profit
Dividends
Retained Earnings
Dividend Payout Ratio
Fixed Asset Turnover
0.40
11.49
Current Ratio 3.6
Owner’s equity, December 31, 2003 $1,854
Average Collection Period
Quick Ratio
Inventory Turnover
Gross Profit Margin
40 days
2.17
8.2
13%

Mini Case (Textbook – Page 79)
You have decided to start managing your own investment portfolio and are considering Hi-
Tech Manufacturing Company as your first equity investment. The company has posted the following financial information on its website and you want to conduct several stages of analysis in order to determine whether to invest or not.
Hi-Tech Manufacturing Company
Income Statement
(in thousands)
2003 2004
Sales 261,429 313,715
Cost of Goods Sold 235,671 281,824
Depreciation
EBIT
12,939
12,819
16,312
15,579
Interest Paid
Taxable Income
Taxes (30%)
Net Income
4,940 6,240
7,879 9,339
2,364 2,802
5,515 6,537
Hi-Tech Manufacturing Company
Balance Sheet
(in thousands)
Current Assets
Cash
2003 2004
Current Liabilties
18,460 7,150 Accounts Payable
2003
34,948
2004
35,746
Accounts Receivable 38,990 42,024 Notes Payable
Inventory 54,109 56,891 Total Current Liabilities
31,993
66,941
36,415
72,160
Total Current Assets
Fixed Assets
Plant & Equipment
Total Assets
111,559 106,065 Long Term Debt
Total Liabilities
Preferred Shares 7%
105,284 138,151 Common Shares
Retained Earnings
216,843 244,216 Total Liab. & O.E.
96,590 115,700
166,531 187,860
9,750 9,750
9,100 9,100
32,462 37,505
216,843 244,215

Industry Ratios
Current Ratio
Quick Ratio
Debt/Equity Ratio
Total Debt Ratio
1.75
0.90
1.40
0.65
Times Interest Earned Ratio 4.50
Cash Coverage Ratio 4.25
Inventory Turnover Ratio 2.90
Receivables Turnover Ratio 8.55
Total Asset Turnover Ratio 1.15
Gross Profit Margin 15.3%
Operating Profit Margin
Return on Equity
4.2%
9.7%
To Do:
1.
Calculate all of the ratios shown above for both 2003 & 2004
2.
Prepare common size Balance Sheet and Income Statements for both years
3.
Compare the company’s performance to its industry peers. Based on this comparison, what are the company’s strengths and what are its weaknesses?
4.
What should management set as its top three priorities for 2005?