Jackson Automotive Systems Q 20150327 Rev Copy
Questions CASE = JACKSON AUTOMOTIVE SYSTEMS Version: 3/27/15
This case invites students to evaluate a firm’s short-term credit risk via the following realizations. First, at the macro level, internalize the primacy of cash and cash flow when an entity is in financial distress. Second, at the micro level, apply financial forecasting techniques to arrive at pro forma forecasted income statements, balance sheets, and statements of cash flow. Third, back at the macro level, critically appraise the decisions and actions of the key players in the case.
Notes:
1. You may choose to use the Excel templates provided to you on the Canvas website.
2. In Exhibit 2, reclassify Prepaid Expenses as current assets.
3. As soon as WIP inventories convert into finished goods, their costs are recognized as COGS.
4. As above-normal inventories are used up, their costs are immediately recognized as COGS.
5. You are free to look outside the case (e.g., in a textbook or on the Internet) for any terminology you don’t understand or haven’t seen before, or to refresh your memory on how to put together an SCF or how to create pro forma financial statements. This is a hard case, so I will be generous in how I allocate partial credit.
Q0. As of June 2013, who are the decision makers in the case? What business decision is each faced with that good FSAV could help improve the quality of? (2 pts) Michigan State Bank, James and the board. Edward could use the FSAV tools to convince bank of its financial health.
Q1. Visually depict in a clear manner on the monthly timeline Aug. 2012 - Sept. 2013 the key financial events in the case. Show events pertaining to JAS’ financial statement estimates above the timeline, and event(s) pertaining to loans and CAPEX below the timeline. (2 pts) 2.4 MM to buy new machinery Dividends of 1.2 MM
Q2. Prepare monthly statements of cash flow for Sept. 2012 - May 2013, and for the nine-month period Sept. 2012 - May 2013. Calculate monthly PELL
This case invites students to evaluate a firm’s short-term credit risk via the following realizations. First, at the macro level, internalize the primacy of cash and cash flow when an entity is in financial distress. Second, at the micro level, apply financial forecasting techniques to arrive at pro forma forecasted income statements, balance sheets, and statements of cash flow. Third, back at the macro level, critically appraise the decisions and actions of the key players in the case.
Notes:
1. You may choose to use the Excel templates provided to you on the Canvas website.
2. In Exhibit 2, reclassify Prepaid Expenses as current assets.
3. As soon as WIP inventories convert into finished goods, their costs are recognized as COGS.
4. As above-normal inventories are used up, their costs are immediately recognized as COGS.
5. You are free to look outside the case (e.g., in a textbook or on the Internet) for any terminology you don’t understand or haven’t seen before, or to refresh your memory on how to put together an SCF or how to create pro forma financial statements. This is a hard case, so I will be generous in how I allocate partial credit.
Q0. As of June 2013, who are the decision makers in the case? What business decision is each faced with that good FSAV could help improve the quality of? (2 pts) Michigan State Bank, James and the board. Edward could use the FSAV tools to convince bank of its financial health.
Q1. Visually depict in a clear manner on the monthly timeline Aug. 2012 - Sept. 2013 the key financial events in the case. Show events pertaining to JAS’ financial statement estimates above the timeline, and event(s) pertaining to loans and CAPEX below the timeline. (2 pts) 2.4 MM to buy new machinery Dividends of 1.2 MM
Q2. Prepare monthly statements of cash flow for Sept. 2012 - May 2013, and for the nine-month period Sept. 2012 - May 2013. Calculate monthly PELL