Financial Management: Hampton Case Study
Financial Management
Hampton Case Study
Learning Objectives
Understand the fundaments of financial forecasting
Understand forecasting financial statements
Practice evaluation of assumptions underlying forecasts
Understanding ratios from lender’s perspective
Understanding effect of stock repurchases
Questions
1. Why can’t a profitable firm like Hampton repay its loan in a timely manner?
2. What major developments between November 1978 and August 1979 contributed to this situation? (Hampton background)
3. Based on the information provided, prepare projected cash budget for the four months September through December 1979, a projected income statement, and a pro forma balance sheet as of December 31, 1979.
4. Critically evaluate the assumptions of the forecasts.
5. Do you believe that Hampton can repay the loan in December?
6. Should the bank approve the request? What are the bank’s major risks?
7. What alternatives does Hampton Tool have?
8. Why did Hampton repurchase the shares? What is the impact on Hampton’s financial performance?
Contents
1. Purpose
2. Background
3. Problem Statement
4. Issues
5. Analysis
6. Options
7. Recommendation
Exhibits
Exhibit 1 – Income Statement
Exhibit 2 – Actual net sales and projected net sales overview
Exhibit 3 - Balance Sheet
Exhibit 4 – Forecasted Balance Sheet
Exhibit 5 – Financial ratios analysis
Exhibit 6 – Forecasted Ratios
Exhibit 7 – Projected Cash Budget - Request
Exhibit 8 – Projected Cash Budget – Proposal 1
Exhibit 9 – Projected Cash Budget – Proposal 2
1. Purpose
The purpose of this memo is to analyze M. Cowins’, President of Hampton Machine Tool Company (HMTC), request from St. Louis National Bank in order to know whether to reject, accept or adjust the request.
2. Background
The industry of capital goods is volatile. The machine tool manufacturing business encountered severe cyclical fluctuations characteristics in
Hampton Case Study
Learning Objectives
Understand the fundaments of financial forecasting
Understand forecasting financial statements
Practice evaluation of assumptions underlying forecasts
Understanding ratios from lender’s perspective
Understanding effect of stock repurchases
Questions
1. Why can’t a profitable firm like Hampton repay its loan in a timely manner?
2. What major developments between November 1978 and August 1979 contributed to this situation? (Hampton background)
3. Based on the information provided, prepare projected cash budget for the four months September through December 1979, a projected income statement, and a pro forma balance sheet as of December 31, 1979.
4. Critically evaluate the assumptions of the forecasts.
5. Do you believe that Hampton can repay the loan in December?
6. Should the bank approve the request? What are the bank’s major risks?
7. What alternatives does Hampton Tool have?
8. Why did Hampton repurchase the shares? What is the impact on Hampton’s financial performance?
Contents
1. Purpose
2. Background
3. Problem Statement
4. Issues
5. Analysis
6. Options
7. Recommendation
Exhibits
Exhibit 1 – Income Statement
Exhibit 2 – Actual net sales and projected net sales overview
Exhibit 3 - Balance Sheet
Exhibit 4 – Forecasted Balance Sheet
Exhibit 5 – Financial ratios analysis
Exhibit 6 – Forecasted Ratios
Exhibit 7 – Projected Cash Budget - Request
Exhibit 8 – Projected Cash Budget – Proposal 1
Exhibit 9 – Projected Cash Budget – Proposal 2
1. Purpose
The purpose of this memo is to analyze M. Cowins’, President of Hampton Machine Tool Company (HMTC), request from St. Louis National Bank in order to know whether to reject, accept or adjust the request.
2. Background
The industry of capital goods is volatile. The machine tool manufacturing business encountered severe cyclical fluctuations characteristics in