Managerial Finance:  Please submit a Word document including your answers to the 4 questions at the end of the instructions.   Johnson Company The Johnson company and wants to increase its sales and would like to seek additional borrowing. The company’s management and investors are concerned about the firm’s survival and its expansion plans. The President wants to improve the financial condition of the company and wants to make sure that the company can survive in the short term. The company’s 2015 actual balance sheet is given and its projected 2016 projected balance sheet is based on getting additional financing. You are a newly hired Berkeley graduate and the president of the company wants you to conduct an analysis of the company’s financial position and recommend what steps or actions Johnson must take to improve its financial health.  Balance Sheet Projected 2016          2015         Cash                                                                 $          85,632        $           7,282        Accounts receivable                                                 878,000                 632,160                              Inventories                                                              1,716,480       1,287,360 Total current assets                                    $     2,680,112        $     1,926,802        Gross fixed ssets                                                    1,197,160              1,202,950                              Less accumulated depreciation                                 380,120           263,160 Net fixed assets   $        817,040 $        939,790 Total assets                                                       $     3,497,152 $     2,866,592 Liabilities and Equity Accounts payable                                            $        436,800        $        524,160        Notes payable                                                            300,000                 636,808                              Accruals                                                                      408,000           489,600 Total current liabilities                               $     1,144,800        $     1,650,568        Long-term debt                                                         400,000                 723,432                              Common stock                                                      1,721,176                 460,000                              Retained earnings                                                      231,176             32,592      Total equity                                                $     1,952,352 $        492,592 Total liabilities and equity                               $     3,497,152 $     2,866,592        Income Statement        2015         Sales                                                                 $     7,035,600                              Cost of goods sold                         ...

1. Managerial Finance:
Please submit a Word document including your answers to the 4
questions at the end of the instructions.
Johnson Company
The Johnson company and wants to increase its sales and would
like to seek additional borrowing. The company’s management
and investors are concerned about the firm’s survival and its
expansion plans. The President wants to improve the financial
condition of the company and wants to make sure that the
company can survive in the short term. The company’s 2015
actual balance sheet is given and its projected 2016 projected
balance sheet is based on getting additional financing.
You are a newly hired Berkeley graduate and the president of
the company wants you to conduct an analysis of the company’s
financial position and recommend what steps or actions Johnson
must take to improve its financial health.
Balance Sheet
Projected 2016
2015
Cash $ 85,632
$ 7,282
Accounts receivable 878,000

2. 632,160
Inventories
1,716,480
1,287,360
Total current assets
$ 2,680,112 $ 1,926,802
Gross fixed ssets
1,197,160 1,202,950
Less accumulated depreciation
380,120
263,160
Net fixed assets
$ 817,040
$ 939,790
Total assets
$ 3,497,152
$ 2,866,592
Liabilities and Equity

3. Accounts payable $ 436,800
$ 524,160
Notes payable 300,000
636,808
Accruals
408,000
489,600
Total current liabilities
$ 1,144,800 $ 1,650,568
Long-term debt 400,000
723,432
Common stock 1,721,176
460,000
Retained earnings
231,176
32,592
Total equity
$ 1,952,352
$ 492,592
Total liabilities and equity

4. $ 3,497,152
$ 2,866,592
Income Statement
2015
Sales $ 7,035,600
Cost of goods sold 5,875,992
Other expenses
550,000
Total operating costs
excluding depreciation
$ 6,425,992
EBITDA $ 609,608
Depreciation
116,960
EBIT $ 492,648

5. Interest expense
70,008
EBT $ 422,640
Taxes (40%)
169,056
Net income
$ 253,584
Ratio Analysis
Industry
2016
2015
Average
Current
2.7´
Quick
1.0´
Inventory turnover

6. 6.1´
Days sales outstanding
32.0
Fixed assets turnover
7.0´
Total assets turnover
2.6´
Debt ratio
50%
Times interest earned
6.2´
Operating margin (EBIT)
7.3%
Net Profit margin
3.5%
ROA

7. 9.1%
ROE
18.2%
Answer the following questions:
1. Calculate the free cash flows from an operating perspective
for the company for
2016.
2. Calculate the ratios for
2015
and analyze and compare these ratios to the industry ratios.
3. As a supplier of materials to Johnson Company, would you
still give it credit?
4. As a banker, will you give Johnson a loan in 2016? Explain
in detail the financial reasons based on the ratios.