Financial Statement Analysis Case 5: Houston Wire and Cable Company Credit Analysis Find the data for this case in the Excel file “5

Financial Statement Analysis

Case 5: Houston Wire and Cable Company Credit Analysis

Find the data for this case in the Excel file “5. HWC 2019 Data.xlsx”.  

You are a supplier, and Houston Wire and Cable (HWC) wants to source from your company. The purpose of this case is to analyze HWC’s recent financials and make an assessment.  

Additional information:

• HWC’s inventories consist of wire and cable, fasteners, lifting products and related hardware, which they value using average cost method.
• HWC did not carry a cash balance until FY18! Instead, it had (and still has) a revolving line of credit with a bank. The liability “book overdraft” is funded by their revolving credit facility as soon as the related checks clear HWC’s disbursement accounts.
• HWC’s share price and shares outstanding on 12/31/19, 12/31/18, 12/29/17 was $4.41 and 16,556,950, $5.06 and 16,611,651, and $7.20 and 16,491,181, respectively.

1. Compute for FY19, FY18, and FY17:
   1. Average inventory days outstanding
   2. Average collection period
   3. Accounts payable days outstanding (using purchases)
   4. Cash conversion cycle (in days)
   5. Current ratio
   6. CFO to current liabilities
   7. Long-term debt to equity
   8. Times interest earned
   1. Free operating cash flow to total debt
2. Compute HWC’s Z-score for the same periods.
3. Based on your computation above and any other analysis you think is appropriate, justify whether you would be willing to extend them trade credit.