(Note that questions sometimes continue on the next page)
Use a spreadsheet program such as Excel for computations for all cases
Riley Supply
1. Prepare one indirect cash flow statement (operating-investing-financing) for 2004-2005 and a second one for 2005-2006. Do not aggregate any accounts. 2. Calculate common-size income statement for each year. 3. Calculate all financial ratios (use “A Basis Set of Financial Ratios”) for each year. You will always be expected to have all ratios and cash flows statements for all years of data. Coming to class without all if these completed means that you are unprepared for quizzes and class discussions. 4. Identify the major factors influencing…show more content… typically stay with the seller. On the liability side, the debts of the company stay with the seller and the equity of the seller disappears. The buyer’s balance sheet will reflect the debt required to execute the purchase as well as the amount of equity put in the new owner. i. Assume that the transaction occurs at the end of January 2006. The pro forma is for a year (through January 2007), but the FYE is a month late than before. Just treat it as a “normal” year. The data file includes the balance sheet of the new company. The following points explain how that balance sheet was constructed and gives some guidance for your pro forma balance sheet. ii. The 2005 balance sheet amounts for gross fixed assets and accumulated depreciation go away at the time of the purchase. They are replaced by the gross fixed asset amounts shown on page 3 (the fixed assets’ market value on that date) and zero for accumulated depreciation (it is as if the fixed assets are new on that date). At the end of the pro forma year, accumulated depreciation will be increased by the depreciation expense for the year. iii. Inventory at the time of purchase will be as shown on page 3. iv. Goodwill on the 2005 balance sheet will be replaced by the amount shown on page 3 at the time of the purchase. v. The term loan will appear on the balance sheet at the time of the purchase as both a current liability and long term
