Dawson Store Inc. Essay

874 words - 3 pages

BOSTON UNIVERSITYMETROPOLITAN COLLEGEFINANCIAL AND MANAGERIAL ACCAUNTINGMET AC630MICHAEL MCGINTYSPRINGFIELDNATIONAL BANKMUTLU AKINU61141746SPRING 2007FINANCIAL ANALYSIS OF DAWSON STORES, INC.Dawson Store, Inc. has applied to Springfield National Bank to obtain a $ 100,000 line of credit, on an unsecured basis, to cover its short term needs. The company's credit demand has been evaluated according to the its last four years financial statements and have been of the opinion that lending the company $ 100,000 short term loan may be risky as long as it does not raise its paid-in capital. Evaluation and the supports of conclusion are provided below.1. THE STATEMENT OF CASH FLOWSTo figure out the recent performance and financial position of the company and to make a conclusion about the credit risk, Comparative Statement of Cash Flows prepared based upon Comparative Balance Sheet and Statement of Income is below:
OPERATING ACTIVITIES

Cash Provided ($) 1981

Cash Provided ($) 1982

Cash Provided ($) 1983

Net income

25,183

51,317

65,663

Adjustments

Depreciation

29,611

10,555

17,054

Due changes in working capital

Increase/Decrease in A/R

(11,161)

(28,563)

(29,896)

Increase/Decrease in Inventories

16,717

(33,720)

(20,693)

Increase/Decrease in Supplies & Prepaid Expenses

(2,278)

665

1,260

Increase/Decrease in A/P

955

46,256

38,885

Increase/Decrease in Taxes other Than Income Taxes

801

1,934

255

Increase/Decrease in Accrued Liabilities

3,370

17,080

8,934

Increase/Decrease in Income Taxes Currently payable

573

20,172

(817)

Increase/Decrease in Deferred Income Taxes, Installment Sales

2,097

6,321

8,095

Increase/Decrease in Current Portion of Long Term Debts

1,895

2,940

(3,139)

Net Cash provided by operating Activities

67,763

94,957

85,601

INVESTING ACTIVITIES

Increase/Decrease in Investment and Other Assets

(2,350)

12,017

(3,060)

Increase/Decrease in Property, Plant, and Equipment

(20,654)

(15,348)

(24,779)

Depreciation

(29,611)

(10,555)

(17,054)

Net Cash provided by Investing Activities

(52,615)

(13,886)

(44,893)

FINANCING ACTIVITIES

Increase/Decrease in Long Term Debt

(4,949)

(22,611)

(14,882)

Increase/Decrease in Deferred Credits

2,016

(3,710)

4,492

Increase/Decrease in Payment of Dividends

(9,619)

(11,032)

(14,348)

Net Cash provided by Financing Activities

(12,552)

(37,353)

(24,738)

SUMMARY

Net Change In Cash

2,596

43,718

15,970

Cash at The Beginning Of Year

8,212

10,808

54,526

Cash at The End Of Year

10,808

54,526

70,496

2. RATIO ANALYSIS2.1. LIQUIDITY RATIOS AND WORKING CAPITALLIQUIDITY RATIOS

1980

1981

1982

1983

Current Ratio 1 (With LIFO)

2.12

2.02

1.74

1.67

Current Ratio 2 (Without LIFO)

2.23

2.21

1.88

1.81

Quick, or Acid Test, Ratio

1.14

1.17

1.04

1.01

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