Cases in Finance Essay

10936 Words Apr 18th, 2012 44 Pages
1
Cash Flow Analysis

Signal Cable Company

When Jay Smith took the job of Assistant to the President, two years ago, things were going rather well at the Signal Cable Company.
The company was on an expansionary path and had branched off into the fiber optics business. The prospects looked good and the economy was strong. The threat of competition was not too severe. Due to the expectation of increased demand for fiber optic communications, the company had established two additional manufacturing facilities, and significantly increased its inventory.
Signal Cable had enjoyed quite a run up in profits over the past few years. However, when the accounting statements were prepared for the current year, the results showed a
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Why has the stock price fallen despite the fact that the net income has increased?
2. How liquid would you say that this company is? Calculate the absolute liquidity of the firm. How does it compare with the previous year's liquidity position?
3. How does the market value of the stock compare with its book value? Is the book value accurately reflecting the true condition of the company?
4. The board of directors is not clear as to why the cash balance has dropped so much in spite of the increase in sales and the gross profit

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