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
2005 ($)2006 ($)
Cash20,0005,000
Accounts receivables150,000395,000
Inventories300,000200,000
Total current assets470,000600,000
Fixed assets, net350,000350,000
Total assets820,000950,000
Accounts payable85,000170,000
Accruals40,00050,000
Bank loan150,000150,000
Total current liabilities275,000270,000
Long-term debt325,000500,000
Common stock ($5 par)100,000100,000
Capital Surplus70,00070,000
Retained Earnings50,00010,000
Total liabilities and equity820,000950,000
Income Statement for 2005 and 2006
2005 ($)2006 ($)
Net sales800,000600,000
Cost of goods sold500,000400,000
Gross profit300,000200,000
Marketing50,00070,000
General and administrative60,00080,000
Depreciation20,00030,000
EBIT170,00020,000
Interest50,00060,000
Earnings before taxes120,00040,000
Income taxes (35%)42,0000
Net income78,00040,000
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.
Grading CriteriaMaximum Points
Accurately calculated the firm’s total operating cycle for two years.10
Recommended working capital and asset restructuring.10
Recommended operations restructuring.10
Recommended financial restructuring.10
Presented a structured document free of spelling and grammatical errors.5
Properly cited sources using APA format.5
Total: