Hampton Exhibits and Pro Formas for Students (1)
Content
Questions in English
Hampton Machine Tool Company A bank bank len lendi ding ng off offic icer er must must decid decidee whet whethe herr to to exte extend nd and and inc incre reas asee a loa loan n to a smal smalll mac machi hine ne too tooll co Other Other issue issuess that that can be addre addresse ssed d include include the the impact impact of of stock stock repurc repurchas hase, e, divide dividends nds,, advanced advanced pay paym m %. 0hy 0hy can' can'tt a profi profitab table le firm firm like like 1ampto 1ampton n repay repay its its loan loan on on time time and and why does it need need more more addi additt
. !ased !ased on the the info informa rmati tion on in in the the case, case, prepar preparee a pro" pro"ect ected ed cash cash budge budgett for for the the four four mont months hs #ept #eptee
. !ased on the information in the case, prepare a pro"ected income statement for the same period, -. eview eview the the result result of your your foreca forecast. st. $o $o the the cash cash budgets budgets and and the the pro forma forma financia financiall stateme statements nts y
4. Critically Critically evaluate evaluate the assumptions on which your forecasts are based. 0hat developments developments coul 2. part. Each question 10 marks
7. 0hat 0hat acti action on shou should ld 6r. 6r. 8ckw 8ckwoo ood d tak takee on on 6r 6r. Cowi Cowins ns'' loa loan n re9 re9ue uest st// 0hat hat are are the the ma" ma"or or risk riskss a
. 0hy did 1ampton 1ampton repurcha repurchase se a substant substantial ial fracti fraction on of its its outstand outstanding ing common common stock/ stock/ 0hat is is t
3. Crit Critic ical ally ly asse assess 1amp 1ampto ton' n'ss divi divide dend nd poli policy cy.. $o you agre agreee with with 6r. 6r. Cowi Cowins ns'' prop propos osal al to pay pay a s
Page 1
Questions in English
pany. Case provides sufficient data for preparation of cash budgets and pro forma financial statem ents by customers, as well as general sensitivity analysis. ional bank financing/ 0hat ma"or developments between 2ovember %&3 and August %&& contri
ber through $ecember %&&. (#)*+
and a pro forma balance sheet as of $ecember %, %&& (#)*,-+ eld the same result/ 0hy/
alter your results/ 5s 6r. Cowins correct in his belief that 1ampton can repay the loan in $ecemb
sociated with the proposed loan/ 0hat other alternatives does 6r. 8ckwood have, and what are th
e impact of this repurchase on 1ampton's financial performance/
bstantial dividend in $ecember/
Page 2
Questions in English
nts in order to analyze the lending officer's problem.
uted to this situation/ (#)*%+
er/
ir pros and cons/ 0hat would you do/
Page 3
Exhibit 1
E x hi b i t 1
S hi pme nt sa tS el l i ngPr i c e( t hous a ndsofdol l a r s )
As Forecast December 1978
1979
January ebruary !ar"h %ril !ay June July ugust
Eight &onths total
As Forecast Actual September 1979
$1,302 1,872 1,63# 1,0#3 1,293 1,479 1,488 1,797
$861 672 1,866 1,#66 873 1,620 723 #07
$11,919
$8,688
'e%te&ber ("tober )o*e&ber +e"e&ber
$1,299 1,347 1,311 2,298
Page 4
$2,163 1,#0# 1,604 2,26#
Exhibit 2
E x h i b i t 2
Ba l a nc eShe e t s , 1 9 78 1 9 7 9( t ho us a ndsofdol l a r s )
1978
1979
November
December
March
une
uly
$2,#20 1,24# 2,601
$491 1,863 2,478
$#0# 1,971 3,474
$1,1#2 1,893 3,276
$1,678 1,269 3,624
urrent assets
6,366
4,842
#,9#0
6,321
6,#71
.ross /xe assets
4,010
4,010
4,010
4,010
4,010
2,998
3,010
3,040
3,070
3,080
1,012 62
1,000 40
970 39
940 24
930 24
$7,440
$#,872
$6,9#9
$7,28#
$7,#2#
$348 #61
$1,000 371 777
$1,000 681 849
$1,000 399 678
$1,000 621 #8#
1#0 840
74 1,040
373 1,040
3#4 1,#66
407 1,#66
1,899
3,262
3,943
3,997
4,179
1,178 4,363
428 2,182
428 2,#88
428 2,860
428 2,918
#,#41
2,610
3,016
3,288
3,346
$7,440
$#,872
$6,9#9
$7,28#
$7,#2#
ash ""ounts re"ei*able, net -n*entories
""u&ulate e%re"iation )et /xe assets Pre%ai ex%enses otal assets )otes %ayable, ban ""ounts %ayable ""ruals axes %ayablea usto&er a*an"e %ay&ents urrent liabilities o&&on sto" $10 %ar *alue5 'ur%lus )et orth otal liabilities an net orth
ax %ay&ents in 1979 in"lue $7#,000 ue !ar"h 1# on uner%ay&ent o 1978 taxes an our eual %ay& o $181,000 ue on the /teenth o %ril, June, 'e%te&ber, an +e"e&ber or esti&ate 1979 tax liability it any uner%ay&ent o 1979 taxes ue !ar"h 1#, 1980 a
Page #
Exhibit 2
Au!ust
$1,##9 684 4,764 7,007 4,010 3,090 920 42 $7,969 $1,000 948 ##2 479 1,#66 4,#4# 428 2,996 3,424 $7,969
nts h
Page 6
"0hibit SN1 Sources an$ ses o, Fun$s* November '2* 1978 Au!ust 1'* 1979 .th Sources
-n"rease in ban ebt -n"rease in retaine earnings +e"rease in "ash -n"rease in "usto&er a*an"es -n"rease in a""ount %ayable +e"rease in a""ount re"ei*able -n"rease in taxes %ayable +e"rease in net /xe assets +e"rease in %re%ai ex%enses Total sources ses 'to" re%ur"hase -n"rease in in*entories +e"rease in a""ruals Total uses
usan$s o, $ollars/
Hampton Machine Tool Company A bank bank len lendi ding ng off offic icer er must must decid decidee whet whethe herr to to exte extend nd and and inc incre reas asee a loa loan n to a smal smalll mac machi hine ne too tooll co Other Other issue issuess that that can be addre addresse ssed d include include the the impact impact of of stock stock repurc repurchas hase, e, divide dividends nds,, advanced advanced pay paym m %. 0hy 0hy can' can'tt a profi profitab table le firm firm like like 1ampto 1ampton n repay repay its its loan loan on on time time and and why does it need need more more addi additt
. !ased !ased on the the info informa rmati tion on in in the the case, case, prepar preparee a pro" pro"ect ected ed cash cash budge budgett for for the the four four mont months hs #ept #eptee
. !ased on the information in the case, prepare a pro"ected income statement for the same period, -. eview eview the the result result of your your foreca forecast. st. $o $o the the cash cash budgets budgets and and the the pro forma forma financia financiall stateme statements nts y
4. Critically Critically evaluate evaluate the assumptions on which your forecasts are based. 0hat developments developments coul 2. part. Each question 10 marks
7. 0hat 0hat acti action on shou should ld 6r. 6r. 8ckw 8ckwoo ood d tak takee on on 6r 6r. Cowi Cowins ns'' loa loan n re9 re9ue uest st// 0hat hat are are the the ma" ma"or or risk riskss a
. 0hy did 1ampton 1ampton repurcha repurchase se a substant substantial ial fracti fraction on of its its outstand outstanding ing common common stock/ stock/ 0hat is is t
3. Crit Critic ical ally ly asse assess 1amp 1ampto ton' n'ss divi divide dend nd poli policy cy.. $o you agre agreee with with 6r. 6r. Cowi Cowins ns'' prop propos osal al to pay pay a s
Page 1
Questions in English
pany. Case provides sufficient data for preparation of cash budgets and pro forma financial statem ents by customers, as well as general sensitivity analysis. ional bank financing/ 0hat ma"or developments between 2ovember %&3 and August %&& contri
ber through $ecember %&&. (#)*+
and a pro forma balance sheet as of $ecember %, %&& (#)*,-+ eld the same result/ 0hy/
alter your results/ 5s 6r. Cowins correct in his belief that 1ampton can repay the loan in $ecemb
sociated with the proposed loan/ 0hat other alternatives does 6r. 8ckwood have, and what are th
e impact of this repurchase on 1ampton's financial performance/
bstantial dividend in $ecember/
Page 2
Questions in English
nts in order to analyze the lending officer's problem.
uted to this situation/ (#)*%+
er/
ir pros and cons/ 0hat would you do/
Page 3
Exhibit 1
E x hi b i t 1
S hi pme nt sa tS el l i ngPr i c e( t hous a ndsofdol l a r s )
As Forecast December 1978
1979
January ebruary !ar"h %ril !ay June July ugust
Eight &onths total
As Forecast Actual September 1979
$1,302 1,872 1,63# 1,0#3 1,293 1,479 1,488 1,797
$861 672 1,866 1,#66 873 1,620 723 #07
$11,919
$8,688
'e%te&ber ("tober )o*e&ber +e"e&ber
$1,299 1,347 1,311 2,298
Page 4
$2,163 1,#0# 1,604 2,26#
Exhibit 2
E x h i b i t 2
Ba l a nc eShe e t s , 1 9 78 1 9 7 9( t ho us a ndsofdol l a r s )
1978
1979
November
December
March
une
uly
$2,#20 1,24# 2,601
$491 1,863 2,478
$#0# 1,971 3,474
$1,1#2 1,893 3,276
$1,678 1,269 3,624
urrent assets
6,366
4,842
#,9#0
6,321
6,#71
.ross /xe assets
4,010
4,010
4,010
4,010
4,010
2,998
3,010
3,040
3,070
3,080
1,012 62
1,000 40
970 39
940 24
930 24
$7,440
$#,872
$6,9#9
$7,28#
$7,#2#
$348 #61
$1,000 371 777
$1,000 681 849
$1,000 399 678
$1,000 621 #8#
1#0 840
74 1,040
373 1,040
3#4 1,#66
407 1,#66
1,899
3,262
3,943
3,997
4,179
1,178 4,363
428 2,182
428 2,#88
428 2,860
428 2,918
#,#41
2,610
3,016
3,288
3,346
$7,440
$#,872
$6,9#9
$7,28#
$7,#2#
ash ""ounts re"ei*able, net -n*entories
""u&ulate e%re"iation )et /xe assets Pre%ai ex%enses otal assets )otes %ayable, ban ""ounts %ayable ""ruals axes %ayablea usto&er a*an"e %ay&ents urrent liabilities o&&on sto" $10 %ar *alue5 'ur%lus )et orth otal liabilities an net orth
ax %ay&ents in 1979 in"lue $7#,000 ue !ar"h 1# on uner%ay&ent o 1978 taxes an our eual %ay& o $181,000 ue on the /teenth o %ril, June, 'e%te&ber, an +e"e&ber or esti&ate 1979 tax liability it any uner%ay&ent o 1979 taxes ue !ar"h 1#, 1980 a
Page #
Exhibit 2
Au!ust
$1,##9 684 4,764 7,007 4,010 3,090 920 42 $7,969 $1,000 948 ##2 479 1,#66 4,#4# 428 2,996 3,424 $7,969
nts h
Page 6
"0hibit SN1 Sources an$ ses o, Fun$s* November '2* 1978 Au!ust 1'* 1979 .th Sources
-n"rease in ban ebt -n"rease in retaine earnings +e"rease in "ash -n"rease in "usto&er a*an"es -n"rease in a""ount %ayable +e"rease in a""ount re"ei*able -n"rease in taxes %ayable +e"rease in net /xe assets +e"rease in %re%ai ex%enses Total sources ses 'to" re%ur"hase -n"rease in in*entories +e"rease in a""ruals Total uses
usan$s o, $ollars/
