Company Analysis: Hampton Machine Tool Company

The questions for the Hampton Machine Tool club argon given below. Please formulate for submission questions 1 and 2 only. That is, please submit your balance sheet for December 31, 1979 and income educational activity for the cardinal month period, September with December 1979, requested in question 2 below (your income statement should non be periodic it should cover the entire quaternion months). Please also rise, but do non submit, the remaining questions.1. why cant a profitable smart set like Hampton repay its loan on time and why does it posit more bank financing? What major developments between November 1978 and August 1979 turn over contributed to this situation?2. Based on the information in the case, prepare a projected income statement for the four months Sept. 1979 by means of Dec. 1979 and a pro forma balance sheet as of December 31, 1979. (Your income statement should non be monthly. You should make unity applications programme the entire four months. )3. critically evaluate the assumptions on which your forecasts are based. What developments could demasculinize your results? Is Mr. Cowins correct in his legal opinion that Hampton can repay the loan in December? 4. Based on the information in the case, prepare a projected hard cash budget for the four months, September through December 1979. Do the cash budgets and pro forma financial statements yield the same results? why, why not? pinpoint they should.An separate hint Do not rely on the statement on page 6, our engineering estimates place that we expect to earn a profit before taxes and interest of about 23% on gross revenue on these shipments. Instead victimization the accounting relation in Q2 (footnote below) when constructing your income statement. 5. What action should Mr. Eckwood take on Mr. Cowins loan request? What are the major risks associated with the proposed loan? What separate alternatives does Mr. Eckwood have and what are the pros and cons? What would you do?6. Why did Hampton repurchase a essential fraction of its outstanding common stock? What is the impact of this repurchase on Hamptons financial performance? Critically assess Hamptons dividend policy. Do you agree with Mr. Cowins proposal to pay a pregnant dividend in December?With Cartwright, we had a relatively simplistic situation, particularly as it concerns size up only one class of inventory was represented, not the typical threesome of nude materials, work in process, and finished goods. (Presumably Cartwright was not adding much value to the raw materials, just selling them through, althoughon the contrarythe case seemed to indicate that the company manufactured some limen frames, trim, etc.)For Hampton, you might find helpful a basic accounting family beginning inventory + purchases + other outlays cost of sales = ending inventorysolving for cost of sales (and recognizing that end begin inventory is change in inventory), Cost of sales = purchases + other outlays change in inventory. (Note that there are a couple inventory types to include.)Additional sub-hint the other outlays amount to $400K/mo. There are other expenses that should also be unplowed in mind when generating the pro-forma income statement.Company Analysis Hampton Machine Tool CompanyThe questions for the Hampton Machine Tool Company are given below. Please prepare for submission questions 1 and 2 only. That is, please submit your balance sheet for December 31, 1979 and income statement for the four month period, September through December 1979, requested in question 2 below (your income statement should not be monthly it should cover the entire four months). Please also prepare, but do not submit, the remaining questions.1. Why cant a profitable company like Hampton repay its loan on time and why does it need more bank financing? What major developments between November 1978 and August 1979 have contributed to this situation?2. Based on the information in the case, prepare a projected income statement for the four months Sept. 1979 through Dec. 1979 and a pro forma balance sheet as of December 31, 1979. (Your income statement should not be monthly. You should make one covering the entire four months.)3. Critically evaluate the assumptions on which your forecasts are based. What developments could alter your results? Is Mr. Cowins correct in his belief that Hampton can repay the loan in December?4. Based on the information in the case, prepare a projected cash budget for the four months, September through December 1979. Do the cash budgets and pro forma financial statements yield the same results? Why, why not? Hint they should.Another hint Do not rely on the statement on page 6, our engineering estimates indicate that we expect to earn a profit before taxes and interest of about 23% on sales on these shipments. Instead using the accounting relation in Q2 (footnote below) when constructing your income statement.5. What action should Mr. Eckwood take on Mr. Cowins loan request? What arethe major risks associated with the proposed loan? What other alternatives does Mr. Eckwood have and what are the pros and cons? What would you do?6. Why did Hampton repurchase a substantial fraction of its outstanding common stock? What is the impact of this repurchase on Hamptons financial performance? Critically assess Hamptons dividend policy. Do you agree with Mr. Cowins proposal to pay a substantial dividend in December?With Cartwright, we had a relatively simplistic situation, particularly as it concerns inventory only one class of inventory was represented, not the typical threesome of raw materials, work in process, and finished goods. (Presumably Cartwright was not adding much value to the raw materials, just selling them through, althoughon the contrarythe case seemed to indicate that the company manufactured some door frames, trim, etc.) For Hampton, you might find helpful a basic accounting relationship beginning inventory + purchases + other outlays cost of sales = ending inventorySolving for cost of sales (and recognizing that end begin inventory is change in inventory), Cost of sales = purchases + other outlays change in inventory. (Note that there are a couple inventory types to include.)Additional sub-hint the other outlays amount to $400K/mo. There are other expenses that should also be kept in mind when generating the pro-forma income statement.