Assignment 2: Turnaround Strategies

Assignment 2: Turnaround Strategies

Below are the balance sheet and income statement for 2005 and 2006 of a company that is in financial distress.

Balance Sheet for 2005 and 2006

 

350,000

50,000

150,000

100,000

70,00070,000

50,000

820,000950,000

	2005 ($)		2006 ($)
Cash			20,000	5,000
Accounts receivables	1 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper				50,000	395,000
Inventories		300,000		200,000
Total current assets	4			70,000		600,000
Fixed assets, net		350,000
Total assets		820,000		950,000
Accounts payable	85,000		170,000
Accruals	40,000
Bank loan		150,000
Total current liabilities	275,000	270,000
Long-term debt	325,000		500,000
Common stock ($5 par)		100,000
Capital Surplus
Retained Earnings	10,000
Total liabilities and equity

Income Statement for 2005 and 2006

 2005 ($)2006 ($)

600,000

500,000

300,000200,000

50,00070,000

20,000

170,00020,000

50,00060,000

0

–40,000

Net sales	800,000
Cost of goods sold	400,000
Gross profit
Marketing
General and administrative		60,000	80,000
Depreciation	30,000
EBIT
Interest
Earnings before taxes	120,000		–40,000
Income taxes (35%)	42,000
Net income	78,000

Your tasks:

Calculate the firm’s total operating cycle for 2005 and 2006.

What type of working capital restructuring can the firm do to turn around its performance? What other types of asset restructuring might the firm consider?

What type of operations restructuring should the firm consider?

What type of financial restructuring should the firm consider?

 

Present the information and your analysis as a four-page report. Include your Excel worksheets Submit your report to the
W5: Assignment 2 Dropbox by October 12, 2013.

10

10

10

10

5

5

Grading Criteria	Maximum Points
Accurately calculated the firm’s total operating cycle for two years.
Recommended working capital and asset restructuring.
Recommended operations restructuring.
Recommended financial restructuring.
Presented a structured document free of spelling and grammatical errors.
Properly cited sources using APA format.
Total: