Assignment
Question 1. Use this balance sheet and income statement from Carver Enterprises to complete partsa and b:
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Balance Sheet
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2013
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Cash and marketable securities
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$490
|
|
Accounts receivable
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5.990
|
|
Inventories
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9,550
|
|
Current assets
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516,030
|
|
Net property plant and equipment
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17,030
|
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Total assets
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533,060
|
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Accounts payable
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$7,220
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Short-term debt
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6,800
|
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Current liabilities
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S14,020
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Long-tens liabilities
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7,010
|
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Total liabilities
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521,030
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Total owners' equity
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12,030
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Total liabilities and owners' equity
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$33,060
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|
|
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Inane Statement
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|
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Revenues
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330,020
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Cost of goods sold
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(19,950)
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Gross profit
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S10,070
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Operating expenses
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(7,960)
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Net operating income
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52,110
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Interest expense
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(940)
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Earnings before taxes
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51,170
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Taxes
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(425)
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Net income
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5745
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a. Prepare a common size balance sheet for Carver Enterprises. Complete the common-size balance sheet:
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Common-Size Balance Sheet
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2013
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|
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Cash and marketable securities
|
490
|
%
|
|
Accounts receivable
|
5,990
|
|
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Inventories
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9,550
|
|
|
Current assets
|
16,030
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%
|
|
Net property plant and equipment
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17,030
|
|
|
Total assets
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33,060
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%
|
|
Accounts payable
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7,220
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%
|
|
Short-term debt
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6,800
|
|
|
Current liabilities
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14,020
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%
|
|
Long-term liabilities
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7,010
|
|
|
Total liabilities
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21,030
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%
|
|
Total owners' equity
|
12,030
|
|
|
Total liabilities and owners' equity
|
33,060
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%
|
b. Prepare a common-size income statement for Carver Enterprises.Complete the common-size income statement:
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Common-Size Income Statement
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2013
|
|
|
Revenues
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30,020
|
%
|
|
Cost of goods sold
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(19,950)
|
|
|
Gross profit
|
10,070
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%
|
|
Operating expenses
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(7,960)
|
|
|
Net operating income
|
2,110
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%
|
|
Interest expense
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(940)
|
|
|
Earnings before taxes
|
1,170
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%
|
|
Taxes
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(425)
|
|
|
Net income
|
745
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%
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Question 2. Use this data table of Campbell Industries liabilities and owners' equity to complete partsa and b.
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Accounts payable
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$530,000
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Notes payable
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$252,000
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Current liabilities
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S732,000
|
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Long-term debt
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S1,127,000
|
|
Common equity
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$4,939,000
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|
Total liabilities and equity
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$6,848,000
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a. What percentage of the firm's assets does the firm finance using debt (liabilities)?
b. If Campbell were to purchase a new warehouse for $1.3 million and finance it entirely with long-term debt, what would be the firm's new debt ratio?
Question 3. (Liquidity analysis)Airspot Motors, Inc. has $2,433,200 in current assets and $869,000 in current liabilities. The company's managers want to increase the firm's inventory, which will be financed using short-term debt. How much can the firm increase its inventory without its current ratio falling below 2.1 (assuming all other assets and current liabilities remain constant)?
Question 4. (Efficiency analysis)Baryla Inc. manufactures high quality decorator lamps in a plant located in eastern Tennessee. Last year the firm had sales of $93 million and a gross profit margin of 45 percent.
a. How much inventory can Baryla hold and still maintain an inventory turnover ratio of at least 6.3 times?
b. Currently, some of Baryla's inventory includes $2.3 million of outdated and damaged goods that simply remain in inventory and are not salable. What inventory ratio must the good inventory maintain in order to achieve an overall turnover ratio of at least 6.3 (including the unsalable items)?
Question 5. (Profitability and capital structure analysis)In the year that just ended, Callaway Lighting had sales of $5,470,000 and incurred cost of goods sold equal to $4,460,000. The firm's operating expenses were $128,000 and its increase in retained earnings was $42,000 for the year. There are currently 99,000 common stock shares outstanding and the firm pays a $4.770 dividend per share. The firm has $1,180,000 in interest-bearing debt on which it pays 7.7 percent interest.
a. Assuming the firm's earnings are taxed at 35%, construct the firm's income statement.
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Income Statement
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Revenues
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Cost of Goods Sold
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Gross Profit
|
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Operating Expenses
|
|
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Net Operating Income
|
|
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Interest Expense
|
|
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Earnings before Taxes
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Income Taxes
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|
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Net Income
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b. Calculate the firm's operating profit margin and net profit margin.
c. Compute the times interest earned ratio.
What does this tell you about Callaway's ability to pay its interest expense? (Fill in the blank with the times interest earned ratio from above and select the best choice.)
1) Callaway's operating income can fall as much as______ times the interest expense and the company would still be able to service its debt.
2) Callaway's interest expense is _______ times higher than its competitors.
3) Callaway's gross profit can fall as much as ______ times and still be able to service its debt.
4) Callaway's operating income can fall as much as ______ times and still be able to repay its debt.
What is the fin's return on equity? (Select the best choice.)
1) The firm's return on equity is the same as the net profit margin, 9.4%.
2) The firm's return on equity is the sum of the operating profit margin and the net profit margin, 25.5%.
3) There is not enough information to answer this question.
4) The firm's return on equity is the same as the operating profit margin, 16.1%.
Question 6. (Market value analysis) Lei Materials' balance sheet lists total assets of $1.16 billion, $132 million in current liabilities, $415 million in long-term debt, $613 million in common equity, and 58 million shares of common stock. If Lei's current stock price is $52.08, what is the firm's market-to-book ratio?
Question 7. (DuPont analysis)Bryley, Inc. earned a net profit margin of 5.1 percent last year and had an equity multiplier of 3.49. If its total assets are $109 million and its sales are $157 million, what is the firm's return on equity?
Question 8. (Calculating financial ratios) Use the balance sheet and income statement for the J. P. Robard Mfg. Company to calculate the following ratios:
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Current ratio
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Times interest earned
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Inventory turnover
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Total asset turnover
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Operating profit margin
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Operating return on assets
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Debt ratio
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Average collection period
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Fixed asset turnover
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Return on equity
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J. P. Rebard Mfg., Day Inc.
Bases Seat ($000)
|
|
Cash
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$460
|
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Accounts receirabk
|
1,920
|
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Inventories
|
910
|
|
Curren assets
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$3290
|
|
Net fixed assets
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4.480
|
|
Total assets
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57,770
|
|
Accounts payable
|
S1,170
|
|
Accrued expenses
|
570
|
|
Short-term notes payable
|
260
|
|
Ctrtent liaberies
|
$2,000
|
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Long-term debt
|
1,920
|
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Owners' equity
|
3,850
|
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Total liabilities and owners' equity
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$7,770
|
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J. P. Eska Mfg., Ise.
Income Statement ($000)
|
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Net sales (al credit)
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$7,990
|
|
Cost of goods sold
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(3,340)
|
|
Gross profit
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$4,650
|
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Opera* expenses (includes 5500 depreciation)
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(3,000)
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Net operating income
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$1,650
|
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Interest expense
|
(363)
|
|
Earnings before taxes
|
$1287
|
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Income taxes (40%)
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(515)
|
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Net inmate
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$772
|