[Get Solution] West Point Supply

Assignment:   Session 1:   a.       Prepare a Statement of Cash Flows for WPS for the company’s 2017 forecast and for the actual 2017 results.  (Use the format for the Statement of Cash Flow outlined in the reading from the case packet.  Hint:  Be sure to take into account the information in footnote b on page 4 of the case regarding fixed assets.  This will affect your statement of cash flows.  Remember:  Beginning Fixed Assets + Asset Purchases – Asset Write-offs = Ending Fixed Assets and, from footnote b, Write-offs = $20,000.  You can use this relationship to calculate Asset Purchases.)   b.       Examine the Statement of Cash Flows so as to identify areas in which significant deviations from the plans occurred.  (A spreadsheet for WPS is available on Blackboard.)   Session 2:    a.       Use key financial ratios to determine what events occurred during 2017 to affect the company’s financial position.  Ratios are presented in the case packet reading “Financial Planning, Financial Ratios and Pro Forma Financial Statements” and in RWJ&J. Be prepared to address the following questions:  Is the company growing (i.e., calculate the year-to-year growth rate of sales)?  Are receivables in control?  (Calculate days sales outstanding (DSO) through time.)  Is inventory in control?  (Calculate days of inventory through time.)  Are payables being managed prudently (Note:  See footnote a to the income statements)?  Is the company’s debt usage in control?  Is the cost of goods sold in control?  Are operating and administrative expenses in control?  Is the company profitable?  Is profitability improving?  (Pay particular attention to the following ratios.  These ratios can be used to answer the preceding questions:  days sales outstanding (DSO), days of purchases outstanding (DPO), days of inventory, total debt ratio, profit ratios, and interest coverage ratio.)  In addressing these questions, calculate the ratios for each year’s actual financial statements and for the forecast financial statements.  In calculating ratios, use end-of-period balances except for profit ratios.  (Use the beginning of year balance sheet data in calculating profit ratios.)   b.       What implications do the deviations from the plan and the general 2017 operating results have for the company and the bank?  What financial strategies seem desirable during 2018?  (Be especially aware of the implicit cost of trade credit.  See the reading in the case packet.)   c.       If you were WPS’s banker, what would you do?