Topic2(case)answer 财务管理英文版教学课件 大学二年级下学期用.ppt

Net cash from operations = -$523,936, mainly because of negative net income. The firm borrowed $1,185,568 and sold $48,600 in short-term investments to meet its cash requirements. Even after borrowing, the cash account fell by $1,718. What effect did the expansion have on net operating working capital (NOWC)? NOWC08 = ($7,282 + $632,160 + $1,287,360) - ($524,160 + $489,600) = $913,042. NOWC07 = $793,800. What effect did the expansion have on capital used in operations? = NOWC + Net fixed assets. = $913,042 + $939,790 = $1,852,832. = $1,138,600. Did the expansion create additional net operating profit after taxes (NOPAT)? NOPAT = EBIT(1 - Tax rate) NOPAT08 = -$690,560(1 - 0.4) = -$690,560(0.6) = -$414,336. NOPAT07 = $125,460. What is your initial assessment of the expansion’s effect on operations? 2008 2007 Sales $5,834,400 $3,432,000 NOPAT ($414,336) $125,460 NOWC $913,042 $793,800 Operating capital $1,852,832 $1,138,600 What was the free cash flow (FCF)for 2008? FCF = NOPAT - Net capital investment = -$414,336 - ($1,852,832 - $1,138,600) = -$414,336 - $714,232 = -$1,128,568. How do you suppose investors reacted? Probably not. A/P increased 260% over the past year, while sales increased by only 70%. If this continues, suppliers may cut off trade credit. No, the negative NOPAT shows that the company is spending more on it’s operations than it is taking in. Short-run: Inventory and fixed assets ? to meet increased sales. A/R ? , Cash ?. Company may have to seek additional financing. Long-run: Collections increase and the company’s cash position would improve. The expansion was financed primarily with external capital. The company issued long-term debt which reduced its financial strength and flexibility. Would external capital have been required if they had broken even in 2008 (Net income = 0)? Yes, the company would still have to finance its increase in assets