Forecasting Financial Statements Sales growth rate 6- Dividend growth.pdf

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Forecasting Financial Statements Sales growth rate 6% Dividend growth rate 7% Interest rate on long-term debt 11% Interest rate on line of credit 12% Tax rate 25% a. Determining the forecasted levels of the line of credit and special dividends Zeiber's Projected Financial Statements (Thousands of Dollars) 1. Balance Sheets 2021 2021 Historical ratios Assets: Cash $12,781.50 Accounts receivable 89,470.50 Inventories 34,084.00 Total current assets $136,336.00 Fixed assets 161,899.00 Total assets $298,235.00 Liabilities and equity Accounts payable $21,302.50 Accruals 17,042.00 Line of credit 0.00 Total current liabilities $38,344.50 Long-term debt 120,000.00 Total liabilities $158,344.50 Common stock 70,000.00 Retained earnings 69,890.50 Total common equity $139,890.50 Total liabilities and equity $298,235.00 2. Income Statements 2021 2021 Historical ratios Sales $426,050.00 Expenses (excluding depr. & amort.) 362,142.50 Depreciation and amortization 12,951.92 EBIT $50,955.58 Interest expense on long-term debt 11,760.00 Interest expense on line of credit 0.00 EBT $39,195.58 Taxes (25%) 9,798.90 Net income $29,396.69 Regular common dividends $14,704.00 Special dividends 0.00 Addition to retained earnings $14,692.69 3. Elimination of the Financial Deficit or Surplus Increase in spontaneous liabilities (accounts payable and accruals) + Increase in long-term bonds and common stock + Net income (in preliminary forecast) minus regular common dividends - Previous line of credit Increase in financing - Increase in total assets Amount of financing deficit or surplus If deficit in financing (negative), draw on line of credit If surplus in financing (positive), pay special dividend b. Determining the forecasted levels of the line of credit and special dividends Sales growth rate Line of credit Special dividend (B3) $0.00 $0.00 3%.

Education

34,084.00
Total current assets
$136,336.00
Fixed assets
161,899.00
Total assets
$298,235.00
Liabilities and equity
Accounts payable
$21,302.50
Accruals
17,042.00
Line of credit
0.00
Total current liabilities
$38,344.50
Long-term debt
120,000.00
Total liabilities
$158,344.50
Common stock
70,000.00
Retained earnings

69,890.50
Total common equity
$139,890.50
Total liabilities and equity
$298,235.00
2. Income Statements
2021
2021 Historical ratios
Sales
$426,050.00
Expenses (excluding depr. & amort.)
362,142.50
Depreciation and amortization
12,951.92
EBIT
$50,955.58
Interest expense on long-term debt
11,760.00
Interest expense on line of credit
0.00
EBT
$39,195.58
Taxes (25%)

9,798.90
Net income
$29,396.69
Regular common dividends
$14,704.00
Special dividends
0.00
Addition to retained earnings
$14,692.69
3. Elimination of the Financial Deficit or Surplus
Increase in spontaneous liabilities (accounts payable and accruals)
+ Increase in long-term bonds and common stock
+ Net income (in preliminary forecast) minus regular common dividends
- Previous line of credit
Increase in financing
- Increase in total assets
Amount of financing deficit or surplus
If deficit in financing (negative), draw on line of credit
If surplus in financing (positive), pay special dividend
b. Determining the forecasted levels of the line of credit and special dividends
Sales growth rate
Line of credit
Special dividend

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ED-16 Computing trend analysis Magic Oaks Realty’s net revenue and net income for the following five year period using 2012 as the base year, follow: 2016 2015 2014 2013 2012 Net Revenue $ 1,310,000 $ 1,187,000 $ 1,110,000 $ 1,011,000 $ 1,045,000 Net Income 122,000 113,000 84,000 72,000 83,000 Requirements 1. Compute trend analysis for net revenue and net income. Round to the nearest full percent. 2. Which grew faster during the period, net revenue or net income? Comprehensive Problem D Analyzing a company for its investment potential In its annual report WRS Athletic Supply Inc includes the following five year financial summary. WRS ATHLETIC SUPPLY, INC. Five-Year Financial Summary (Partial; adapted) (Dollar amounts in thousands except per share data) 2018 2017 2016 2015 2014 2013 Net Sales $244,524 $217,799 $191,329 $165,013 $137,634 Net Sales Increase 12% 14% 16% 20% 17% Domestic Comparative Store Sales Increase 5% 6% 5% 8% 9% Other Income—Net 2,001 1,873 1,787 1,615 1,391 Cost of Goods Sold 191,838 171,562 150,255 129,664 108,725 Operating, Selling, and General and Administrative Expenses 41,236 36,356 31,679 27,408 22,516 Interest: Interest Expense (1,063) (1,357) (1,383) (1,045) (803) Interest Income 138 171 188 204 189 Income Tax Expense 4,487 3,897 3,692 3,338 2,740 Net Income 8,039 6,671 6,295 5,377 4,430 Per Share of Common Stock: Net Income 1.81 1.49 1.41 1.21 0.99 Dividends 0.30 0.28 0.24 0.20 0.16 Financial Position Current Assets, Excluding Merchandise Inventory $ 30,483 $ 27,878 $ 26,555 $ 24,356 $ 21,132 Merchandise Inventory at LIFO Cost 24,891 22,614 21,442 19,793 17,076 $16,497 Property, Plant, and Equipment, Net 51,904 45,750 40,934 35,969 25,973 Total Assets 94,685 83,527 78,130 70,349 49,996 Current Liabilities 32,617 27,282 28,949 25,803 16,762 Long-term Debt 22,731 21,143 17,838 18,712 12,122 Shareholders’ Equity 39,337 35,102 31,343 25,834 21,112 Financial Ratios Acid-test Ratio 0.9 1.0 0.9 0.9 1.3 Rate of Return on Total Assets 10.2% 9.9% 10.3% 10.7% 9.6% Rate of Return on Shareholders’ Equity 21.6% 20.1% 22.0% 22.9% 22.4% Requirements 1. Analyze the company’s financial summary for the fiscal years 2014–2018 to decide whether to invest in the common stock of WRS Include the following sections in your analysis, and fully explain your final decision. 1. Trend analysis for net sales and net income (use 2014 as the base year). 2. Profitability analysis. 3. Evaluation of the ability to sell merchandise inventory (WRS uses the LIFO method). 4. Evaluation of the ability to pay debts. 5. Evaluation of dividends. ...

ED-16 Computing trend analysisMagic Oaks Realty’s net revenue a.docx

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Income Statements and Balance Sheet Balance Sheet 2012 2013 2014 Cash $9,000 $7,282 $14,000 Short-term investments 48,600 20,000 71,632 Accounts receivable 351,200 632,160 878,000 Inventories 715,200 1,287,360 1,716,480 Total current assets $1,124,000 $1,946,802 $2,680,112 Gross fixed assets 491,000 1,202,950 1,220,000 Less: Accumulated depreciation 146,200 263,160 383,160 Net fixed assets $344,800 $939,790 $836,840 Total assets $1,468,800 $2,886,592 $3,516,952 Liabilities and Equity Accounts payable $145,600 $324,000 $359,800 Notes payable 200,000 720,000 300,000 Accruals 136,000 284,960 380,000 Total current liabilities $481,600 $1,328,960 $1,039,800 Long-term debt 323,432 1,000,000 500,000 Common stock (100,000 shares) 460,000 460,000 1,680,936 Retained earnings 203,768 97,632 296,216 Total equity $663,768 $557,632 $1,977,152 Total liabilities and equity $1,468,800 $2,886,592 $3,516,952 2. Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? Income Statements and Balance Sheet Balance Sheet 2012 2013 2014 Cash $9,000 $7,282 $14,000 Short-term investments 48,600 20,000 71,632 Accounts receivable 351,200 632,160 878,000 Inventories 715,200 1,287,360 1,716,480 Total current assets $1,124,000 $1,946,802 $2,680,112 Gross fixed assets 491,000 1,202,950 1,220,000 Less: Accumulated depreciation 146,200 263,160 383,160 Net fixed assets $344,800 $939,790 $836,840 Total assets $1,468,800 $2,886,592 $3,516,952 Liabilities and Equity Accounts payable $145,600 $324,000 $359,800 Notes payable 200,000 720,000 300,000 Accruals 136,000 284,960 380,000 Total current liabilities $481,600 $1,328,960 $1,039,800 Long-term debt 323,432 1,000,000 500,000 Common stock (100,000 shares) 460,000 460,000 1,680,936 Retained earnings 203,768 97,632 296,216 Total equity $663,768 $557,632 $1,977,152 Total liabilities and equity $1,468,800 $2,886,592 $3,516,952 Solution 2. Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? Ans: Depreciation and amortization are not cash charges, so neither of them has an effect on a firm’s reported profits. *****.

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FelipeConcepcion5

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Ratio Analysis The Vanguard Group, Inc. has compiled the following financial statements and comparative financial ratios for the year-end review. Balance Sheet Vanguard Group, Inc. December 31, 2007 Assets Current assets Cash $ 118,750 Accounts receivable 296,250 Inventory 303,750 Total current assets $ 718,750 Gross fixed assets $625,000 Less: Accumulated depreciation 93,750 Net fixed assets 531,250 Total assets $1,250,000 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 111,250 Notes payable 211,250 Accruals 108,750 Total current liabilities $ 431,250 Long-term debt 235,000 Total liabilities $ 666,250 Stockholders’ equity Common stock 318,750 Retained earnings 265,000 Total stockholders’ equity $ 583,750 Total liabilities and stockholders’ equity $1,250,000 Income Statement Vanguard Group, Inc. for the Year Ended December 31, 2007 Sales revenue $1,680,000 Cost of sales 1,362,480 Gross profits $ 317,520 Less: Operating expenses Selling expense $ 125,600 General and administrative expense 81,600 Depreciation expense 24,000 Total operating expense $231,200 Operating profits $ 86,320 Less: Interest expense 15,600 Net profits before taxes $ 70,720 Less: Taxes (40%) 28,288 Net profits after taxes $ 42,432 Historical and Industry Average Ratios Vanguard Group, Inc. Industry Average Ratio 2005 2006 2007 2007 Current ratio 1.6 1.7 — 1.6 Quick ratio 0.9 1.0 — 0.9 Inventory turnover 6.0 5.0 — 8.4 Average collection period 40 days 50 days — 40 days Total asset turnover 1.5 1.5 — 1.75 Debt ratio 60% 56% — 50% Times interest earned 2.5 3.5 — 4.0 Gross profit margin 20% 19.7% — 20% Operating profit margin 4.7% 4.8% — 6% Net profit margin 2.0% 2.3% — 3% Return on investment 3.0% 3.5% — 5.25% Return on equity 7.5% 7.95% — 10.5% ...

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Ratio.docx

dorishigh

There are 76 red xxx’s – each worth 1.18 points. You only need to fill in where you see red xxx’s (big or small) CHAPTER 1 THE McGEE CAKE COMPANY 1. The advantages to a LLC are: xxxx The biggest disadvantage is: xxxx 2. .xxxx C-2 CASE SOLUTIONS 3. .xxxx CHAPTER 2 CASH FLOWS AND FINANCIAL STATEMENTS Below are the financial statements that you are asked to prepare. 1. The income statement for each year will look like this: Income Statement 2010 2011 Sales xxxx xxxx Cost of goods sold 163,849 206,886 Selling and administrative xxxx xxxx Depreciation 46,255 52,282 EBIT $79,110 $90,584 Interest 10,056 11,526 EBT $69,054 $79,058 Taxes (use the problem to figure This amount out xxxx xxxx Net income $55,243 $63,246 Dividends(read the case to find out how much this is) xxxx xxxx Addition to retained earnings (this would be whatever the net income is less the dividends paid out) xxxx xxxx 2. The balance sheet for each year will be: Balance Sheet as of Dec. 31, 2010 Cash xxxx Accounts payable xxxx Accounts receivable xxxx Notes payable xxxx Inventory xxxx Current liabilities $60,832 Current assets $72,651 Long-term debt xxxxx Net fixed assets xxxxxx Owners' equity xxxxx Total assets $276,719 Total liab. and equity $276,719 In the first year, equity is not given. Therefore, we must calculate equity as a plug variable. Since total liabilities and equity is equal to total assets, equity can be calculated as: Equity = $276,719 – 60,832 – 103,006 Equity = $112,881 Balance Sheet as of Dec. 31, 2011 Cash xxxx Accounts payable xxxx Accounts receivable xxxx Notes payable xxxx Inventory xxxx Current liabilities $68,121 Current assets $100,834 Long-term debt xxxx Net fixed assets xxxx Owners' equity Xxxx(see below) Total assets $349,459 Total liab. and equity $349,459 The owner’s equity for 2011 is the beginning of year owner’s equity, plus the addition to retained earnings, plus the new equity, so: Equity = $112,881 + 31,623 + 20,500 Equity = $165,004 3-6 are completed for you so you can answer the questions 3. Using the OCF equation: ( OCF = EBIT + Depreciation – Taxes The OCF for each year is: OCF2010 = $79,110 + 46,255 – 13,811 OCF2010 = $111,554 OCF2011 = $90,584 + 52,282 – 15,812 OCF2011 = $127,054 4. To calculate the cash flow from assets, we need to find the capital spending and change in net working capital. The capital spending for the year was: Capital spending Ending net fixed assets $248,625 – Beginning net fixed assets 204,068 + Depreciation 52,282 Net capital spending $96,839 And the change in net working capital was: Change in net working capital Ending NWC $32,713 – Beginning NWC 11,819 Change in NWC $20,894 So, the cash flow from assets was: Cash flow from assets Operating cash flow $127,054 – Net capital spending 96,839 – Change in NWC ...

There are 76 red xxx’s – each worth 1.18 points. You only need to.docx

christalgrieg

Exercises 1. Horizontal analysis. Mary Lynn Corporation has been operating for several years. Selected data from the 20X1 and 20X2 financial statements follow. 20X2 20X1 Current Assets $ 76,000 $ 80,000 Property, Plant, and Equipment (net) 99,000 90,000 Intangibles 25,000 50,000 Current Liabilities 40,800 48,000 Long-Term Liabilities 143,000 160,000 Stockholders' Equity 16,200 12,000 Net Sales 500,000 500,000 Cost of Goods Sold 332,500 350,000 Operating Expenses 93,500 85,000 2. Prepare a horizontal analysis for 20X1 and 20X2. Briefly comment on the results of your work. 3. Vertical analysis. Study the data pertaining to Mary Lynn Corporation that appear in Exercise 1. Prepare a vertical analysis for 20X1 and 20X2 and briefly evaluate the results of your work. 4. Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10: Edison Stagg Thornton Cash $4,000 $2,500 $1,000 Short-Term Investments 3,000 2,500 2,000 Accounts Receivable 2,000 2,500 3,000 Inventory 1,000 2,500 4,000 Prepaid Expenses 800 800 800 Accounts Payable 200 200 200 Notes Payable: Short-Term 3,100 3,100 3,100 Accrued Payables 300 300 300 Long-Term Liabilities 3,800 3,800 3,800 a. Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why? b. Suppose Thornton is using FIFO for inventory valuation and Edison is using LIFO. Comment on the comparability of information between these two companies. c. If all short-term notes payable are due on July 11 at 8 a.m., comment on each company's ability to settle its obligation in a timely manner. 5. Computation and evaluation of activity ratios. The following data relate to Alaska Products Inc.: 20X5 20X4 Net Credit Sales $832,000 $760,000 Cost of Goods Sold 440,000 350,000 Cash, Dec. 31 125,000 110,000 Accounts Receivable, Dec. 31 180,000 140,000 Inventory, Dec. 31 70,000 50,000 Accounts Payable, Dec. 31 115,000 108,000 6. The company is planning to borrow $300,000 via a 90-day bank loan to cover short-term operating needs. a. Compute the accounts-receivable and inventory-turnover ratios for 20X5. Alaska rounds all calculations to two decimal places. b. Study the ratios from part (a) and comment on the company's ability to repay a bank loan in 90 days. c. Suppose that Alaska's major line of business involves the processing and distribution of fresh and frozen fish throughout the United States. Do you have any concerns about the company's inventory-turnover ratio? Briefly discuss. 7. Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The company reported the following information for 20X7: Net sales $1,500,000 Interest Expense 120,000 Income Tax Expense 80,000 Preferred Dividends 25,000 Net Income 130,000 Average Assets 1,100,000 Average Common Stockholders' Equity 400,000 a. Compute the net-profit-margin ratio and the rates of re ...

Exercises1. Horizontal analysis. Mary Lynn Corporation has been .docx

SANSKAR20

Final Exam Take Home Problem (20 points) Based on the information provided below, prepare the statement of cash flows for the Gulp-it-Down Coffee Co. Gulp-it-Down Coffee Co. Comparative Balance Sheet For the Year Ended December 31, 2012 2012 2011 Assets Cash 140,000 160,000 Accounts Receivables 400,000 380,000 Inventory 480,000 420,000 Fixed Assets (net of accumulated Depreciation) 1,860,000 1,720,000 Less: Accumulated Depreciation (1,000,000) (900,000) Total 1,880,000 1,780,000 Liabilities & Owner’s Equity Accounts Payable 240,000 260,000 Accrued expense 120,000 100,000 Bonds Payable 780,000 720,000 Capital Stock 420,000 420,000 Retained Earnings 320,000 280,000 Total 1,880,000 1,780,000 Additional Information: (1.) Net income for the year amounted to $60,000, and cash dividends were declared and paid in the amount of $20,000. (2.) Gulp-it-Down Coffee Co.'s only noncash expense was depreciation Expense which totaled $100,000. (3.) The company purchased plant assets for $140,000. (4.) Bonds payable in the amount of $60,000 were issued during the year. .

Final Exam Take Home Problem (20 points)Based on the information p.docx

charlottej5

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