Financial Analysis of Luther Corporation

Financial Analysis of Luther Corporation



The purpose of this task is to provide an overview of the tools you have used so far, and to provide additional exercises for the tools introduced so far. How are you? Do you think you have considerable strengths when it comes to finance? After that, you are ready to move on and continue applying your skills.

This task consists of 4 parts and contains 9 questions that must be answered. Read the instructions carefully and answer all the questions.

Part 1: Balance Sheet (2 points)
Look at the balance sheet below and answer question 1 in the space below. < br> >
Luther Corporation

Consolidated Balance Sheet

December 31, 2018 and 2017 (in $ millions)

Assets20182017Liabilities and Stockholders’ Equity20182017
Current AssetsCurrent Liabilities
Cash63.658.5Accounts payable87.673.5
Accounts receivable55.539.6Notes payable /short-term debt10.59.6
Inventories45.942.9Current maturities of long-term debt39.936.9
Other current assets6.03.0Other current liabilities6.012.0
Total current assets171.0144.0     Total current liabilities144.0132.0
Long-Term AssetsLong-Term Liabilities
Land66.662.1  Long-term debt239.7168.9
Buildings109.591.5  Capital lease obligations
Equipment119.199.6Total Debt239.7168.9
Less accumulated depreciation(56.1)(52.5)Deferred taxes22.822.2
Net property, plant, and equipment239.1200.7Other long-term liabilities
Goodwill60.0Total long-term liabilities262.5191.1
Other long-term assets63.042.0Total liabilities406.5323.1
     Total long-term assets362.1242.7Stockholders’ Equity126.663.6
Total Assets533.1386.7Total liabilities and Stockholders’ Equity533.1386.7

Question 1: As of December 31, 2017, Luthor had 8 million shares outstanding and What’s Luther’s if it’s trading at $15 a share? What is the market-to-book ratio? (2 points)

Part 2: Income Statement (9 points)
Look at the income statement below and write your answers to questions 2 and 3 in the space below.

Luther Corporation
Consolidated Income
Statement Year ended December 31 (in $ millions)
Total sales610.1578.3
Cost of sales(500.2)(481.9)
Gross profit109.996.4
Selling, general, andadministrative expenses(40.5)(39.0)
Research and development(24.6)(22.8)
Depreciation and amortization(3.6)(3.3)
Operating income41.231.3
Other income
Earnings before interest and taxes (EBIT)41.231.3
Interest income (expense)(25.1)(15.8)
Pretax income16.115.5
Net income10.610.2
Price per share$16$15
Shares outstanding (millions)10.28.0
Stock options outstanding (millions)0.30.2
Stockholders’ Equity126.663.6
Total Liabilities and Stockholders’ Equity533.1386.7

Question 2: Luther’s Return on Equity (ROE), Return on Assets (ROA) , and calculate the price-to-earnings ratio – ratio (PER) for the year ended December 31, 2017. (6 points)

Question 3: If Luther’s outstanding debt in 2018 is $55.5 million, calculate Luther’s outstanding debt in 2018. (3 points)

Part 3: Scenario (10 points)
Read the scenario below and answer question 4.

Scenario: Joe has just inherited the family business and has nothing. He wanted to continue his family business and decided to sell it to an entrepreneur. Joe was offered an immediate payment of $100,000 in exchange for the family business. Joe will also be paid $50,000 over one year, $50,000 over two years, and $75,000 over three years. Joe’s current market interest rate is 6%.

Question 4: Suppose a second entrepreneur approaches Joe and offers her $250,000 for today’s deal. Should Joe accept the new entrepreneur’s offer, or stick with her original offer of $100,000 and her three consecutive years of payments?Why? (10 points)

Part 4: Multiple Choice Questions (24 points)
Read the scenario and choose the option that best completes the statement or answers the question. Show all works as they are sub-graded.

Scenario: You are 30 today and you plan to retire at 65. Your current salary is $45,000 and is expected to increase by 5% annually as long as you keep working. To save for retirement, plan to make annual contributions to your retirement account. The first contribution will be on her 31st birthday and will be 8% of her salary for the year. Similarly, you will pay 8% of your salary each year until you turn 65. Suppose the interest rate is 7%. Show all calculations. Partial grades are awarded. Use the scenarios from questions 5 and 6.

Question 5: The present value of retirement savings (at age 30) is closest to: (10 points)

(a) $87,000 $(b) $75,230 (c) $46,600 (d) $108,000

Your answer: _

Question 6: The future value of retirement savings (at age 65) is closest to: (2 points)

(a) $497,530 (b) $108,000 (c) $928,895 (d) $1,263,236

Your answer: __

Scenario: Hasbeen Toys Quarterly Working capital levels are shown in the table below (in millions of US dollars). Use this table for questions 7-9.

Accounts Receivable5857451,260760
Accounts Payable8359101,0551,145

Question 7: In which quarter will Hasbeen’s seasonal working capital be most needed? (8 points)

(a) 2 (b) 3 (c) 4 (d) 1

Your answer: __

Question 8: Works permanently Necessity Has been Toys’ capital is closest to the following values: (2 marks)

(a) $2.435 billion (b) $1.1 billion (c) $770 million (d ) $1.275 billion

Your answer: __ >
Question 9: Has been Toys’ preliminary Q1 working capital requirement is closest to: (2 marks)

(a) $770 million (b) $845 million (c) $340 million (d) $0 million

Your answer: __

Calculate the price of your order

Select your paper details and see how much our professional writing services will cost.

We`ll send you the first draft for approval by at
Price: $36
  • Freebies
  • Format
  • Formatting (MLA, APA, Chicago, custom, etc.)
  • Title page & bibliography
  • 24/7 customer support
  • Amendments to your paper when they are needed
  • Chat with your writer
  • 275 word/double-spaced page
  • 12 point Arial/Times New Roman
  • Double, single, and custom spacing
  • We care about originality

    Our custom human-written papers from top essay writers are always free from plagiarism.

  • We protect your privacy

    Your data and payment info stay secured every time you get our help from an essay writer.

  • You control your money

    Your money is safe with us. If your plans change, you can get it sent back to your card.

How it works

  1. 1
    You give us the details
    Complete a brief order form to tell us what kind of paper you need.
  2. 2
    We find you a top writer
    One of the best experts in your discipline starts working on your essay.
  3. 3
    You get the paper done
    Enjoy writing that meets your demands and high academic standards!

Samples from our advanced writers

Check out some essay pieces from our best essay writers before your place an order. They will help you better understand what our service can do for you.

Get your own paper from top experts

Order now

Perks of our essay writing service

We offer more than just hand-crafted papers customized for you. Here are more of our greatest perks.

  • Swift delivery
    Our writing service can deliver your short and urgent papers in just 4 hours!
  • Professional touch
    We find you a pro writer who knows all the ins and outs of your subject.
  • Easy order placing/tracking
    Create a new order and check on its progress at any time in your dashboard.
  • Help with any kind of paper
    Need a PhD thesis, research project, or a two-page essay? For you, we can do it all.
  • Experts in 80+ subjects
    Our pro writers can help you with anything, from nursing to business studies.
  • Calculations and code
    We also do math, write code, and solve problems in 30+ STEM disciplines.

Frequently asked questions

Get instant answers to the questions that students ask most often.

See full FAQ
    See full FAQ

    Take your studies to the next level with our experienced specialists

    Hello, we are online 24/7. Leave a message we will reply instantly