Reference no: EM131365463

Assignment

Question 1. Use this balance sheet and income statement from Carver Enterprises to complete partsa and b:

Balance Sheet	2013
Cash and marketable securities	$490
Accounts receivable	5.990
Inventories	9,550
Current assets	516,030
Net property plant and equipment	17,030
Total assets	533,060
Accounts payable	$7,220
Short-term debt	6,800
Current liabilities	S14,020
Long-tens liabilities	7,010
Total liabilities	521,030
Total owners' equity	12,030
Total liabilities and owners' equity	$33,060
Inane Statement
Revenues	330,020
Cost of goods sold	(19,950)
Gross profit	S10,070
Operating expenses	(7,960)
Net operating income	52,110
Interest expense	(940)
Earnings before taxes	51,170
Taxes	(425)
Net income	5745

a. Prepare a common size balance sheet for Carver Enterprises. Complete the common-size balance sheet:

Common-Size Balance Sheet	2013
Cash and marketable securities	490	%
Accounts receivable	5,990
Inventories	9,550
Current assets	16,030	%
Net property plant and equipment	17,030
Total assets	33,060	%
Accounts payable	7,220	%
Short-term debt	6,800
Current liabilities	14,020	%
Long-term liabilities	7,010
Total liabilities	21,030	%
Total owners' equity	12,030
Total liabilities and owners' equity	33,060	%

b. Prepare a common-size income statement for Carver Enterprises.Complete the common-size income statement:

Common-Size Income Statement	2013
Revenues	30,020	%
Cost of goods sold	(19,950)
Gross profit	10,070	%
Operating expenses	(7,960)
Net operating income	2,110	%
Interest expense	(940)
Earnings before taxes	1,170	%
Taxes	(425)
Net income	745	%

Question 2. Use this data table of Campbell Industries liabilities and owners' equity to complete partsa and b.

Accounts payable	$530,000
Notes payable	$252,000
Current liabilities	S732,000
Long-term debt	S1,127,000
Common equity	$4,939,000
Total liabilities and equity	$6,848,000

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.

Income Statement
Revenues
Cost of Goods Sold
Gross Profit
Operating Expenses
Net Operating Income
Interest Expense
Earnings before Taxes
Income Taxes
Net Income

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:

Current ratio
Times interest earned
Inventory turnover
Total asset turnover
Operating profit margin
Operating return on assets
Debt ratio
Average collection period
Fixed asset turnover
Return on equity

J. P. Rebard Mfg., Day Inc. Bases Seat ($000)
Cash	$460
Accounts receirabk	1,920
Inventories	910
Curren assets	$3290
Net fixed assets	4.480
Total assets	57,770
Accounts payable	S1,170
Accrued expenses	570
Short-term notes payable	260
Ctrtent liaberies	$2,000
Long-term debt	1,920
Owners' equity	3,850
Total liabilities and owners' equity	$7,770
J. P. Eska Mfg., Ise. Income Statement ($000)
Net sales (al credit)	$7,990
Cost of goods sold	(3,340)
Gross profit	$4,650
Opera* expenses (includes 5500 depreciation)	(3,000)
Net operating income	$1,650
Interest expense	(363)
Earnings before taxes	$1287
Income taxes (40%)	(515)
Net inmate	$772