FIN 534 - Homework Set 1

Assume that you recently graduated and have just reported to work as an investment advisor at the one

of the firms on Wall Street. You have been presented and asked to review the following Income

Statement and Balance Sheets of one of the firm's clients. Your boss has developed the following set of

questions you must answer.

Cash Flow

    EBIT*(1-tax rate)  Depreciation - Change in Net Working Capital - Capital Expenditure

           17440*(1-40%)-(617842-642400) - 711950

-676928

Depreciation is doubled

If depreciation is doubled, Net loss will increase by 116,960. The negative net cash flow will be reduced by 46,784 (116960*.40)

Liquidity ratios

Current ratio of the company is 1.5 times for 2013 and 2.3 times for 2012. Quick ratio is 0.5...