Assignment 2 Assignment 2 is made up of seven questions. Read


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Looking for help with a managerial accounting assignment. Assignment 2.docx Assignment 2 Assignment 2 is made up of seven questions. Read the requirements for each question thoroughly, and plan your responses carefully. Ensure that you answer each of the required components as concisely and completely as possible. If supporting calculations are required, present them in good form. Case 1 10 marks Case 1. Two businesses, Web Services and PC Providers, have sought business loans from you. To decide whether to make the loans, you have requested their balance sheets. Evaluating business operations; using financial statements Web S ervices Balance S heet October 31,2011 Assets Cash Accounts receivable Furniture Software Computers Total Assets PCProviders, Inc Balance Sheet October 31,2011 Assets Cash 11,000 Accounts receivable 4,000 Merchandise inventory 36,000 Furniture and fixtures 79,000 Building 300,000 Land 430,000 Total Assets Liablities Accounts payable Notes payable Total liabilities 9,000 24,000 85,000 9,000 82,000 14,000 223,000 Liablities 13,000 Accounts payable 377,000 Notes payable 390,000 Total liabilities 12,000 28,000 40,000 Shareholder’s equity S hareholder’s equity 183,000 Shareholder’s equity 40,000 Shareholder’s equity Total liabiliites and shareholdre’s equity 430,000 Total liabiliites and shareholdre’s equity 223,000 Required 1. Using only these balance sheets, to which entity would you be more comfortable lending money? Explain fully, citing specific items and amounts from the respective balance sheets. 2. Is there other financial information you would consider before making your decision? Be specific. C10-37 15 marks C10­37 Use cash flow data to evaluate potential investments Your company has some excess cash and would like to invest it in the stock of another company. You investigate several different stocks and are trying to decide which stock would be the best investment for your company. One factor you investigate is each company’s cash flow. The summaries of the cash flow statements for your three top stock choices follow: (000s omitted) Net cash provided by (used for) operating activities Cash provided by (used by) investing activities: Cash used to purchase plant or equipment Proceeds from the sale of equipment Cash used to purchase investments in stock Net cash provided by (used for) investing activities Cash provided by (used for) financing activities: Proceeds from bond issuance. Repayment of long-term debt. Cash proceeds from issuance of stock. Cash payments for dividends Net cash provided by (used for) financing activities: net increase in cash Baxter, Corp. Meredith Enterprises Rollyson, Inc. -20,000 28,100 16,000 -12,100 (-25,000) 8,000 -5,000 8,000 -17,100 23,500 -1,000 4,000 -2,000 -2,500 -25,000 5,000 -5,000 12,000 20,000 8,000 -3,000 8,000 17,000 8,000 Although you will look at many other criteria in your stock purchase recommendation, what can you tell about each of the three companies listed? Based solely on cash flow, which stock appears to be better? C11-44 15 marks C11­44 Investment recommendation Take the role of an investment analyst at Prudential Bache. It is your job to recommend investments for your clients. The only information you have are some ratio values for two companies in the pharmaceuticals industry. Ratio Return on equity Return on assets Days’ sales in receivables inventory turnover Gross profit percentage Net income as a percentage of sales Times interest earned Healthtime Mocek 21.5% 32.3% 16.4% 17.1% 42 36 8 6 51% 53% 8.3% 7.2% 9 16 Write a report to Prudential Bache’s investment committee. Recommend on of the company’s stock over the other. State the reasons for your recommendation. C12-72 15 marks C12­72. Prepare cash budgets under two alternatives Each autumn, as a hobby, Suzanne De Angelo weaves cotton placemats to sell at a local crafts shop. The mats sell for $20 per set of four. The shop charges a 10% commission and remit

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