Joshua & White Technologies' financial statements for 2009 and 2010 are provided. The assistant is asked to analyze various ratios and perform common size and percentage change analyses to evaluate changes in the company's liquidity, asset management, profitability, and financial position between the two years. Specifically, the assistant calculates ratios such as the current ratio, inventory turnover, return on assets, and performs DuPont, common size, and percentage change analyses on the income statement, balance sheet, key line items, and ratios.

1. Ch02 P14 Build a Model Spring 1, 20137/22/12Chapter 2. Ch
02 P14 Build a ModelExcept for charts and answers that must
be written, only Excel formulas that use cell references or
functions will be accepted for credit. Numeric answers in cells
will not be accepted.a. Cumberland Industries' most recent sales
were $455,000,000; operating costs (excluding depreciation)
were equal to 85% of sales; net fixed assets were $67,000,000;
depreciation amounted to 10% of net fixed assets; interest
expenses were $8,550,000; the state-plus-federal corporate tax
rate was 40% and Cumberland paid 25% of its net income out in
dividends. Given this information, construct Cumberland's
income statement. Also calculate total dividends and the
addition to retained earnings.The input information required for
the problem is outlined in the "Key Input Data" section below.
Using this data and the balance sheet above, we constructed the
income statement shown below.Key Input Data for Cumberland
Industries2010 (Thousands of dollars)Sales
Revenue$455,000Expenses (excluding depreciation) as a
percent of sales85.0%Net fixed assest$67,000Depr. as a % of
net fixed assets10.0%Tax rate40.0%Interest
expense$8,550Dividend Payout Ratio25%Cumberland
Industries: Income Statement (Thousands of
dollars)2010SalesOperating costs excluding depreciation
EBITDADepreciation (Cumberland has no amortization charges)
EBITInterest expense EBTTaxes (40%) Net incomeCommon
dividendsAddition to retained earningsb. Cumberland
Industries' partial balance sheets are shown below. Cumberland
issued $10,000,000 of new common stock in the most recent
year. Using this information and the results from part a, fill in
the missing values for common stock, retained earnings, total
common equity, and total liabilities and equity. Dollar value of
common stock issued (in thousands of
dollars)$10,000Cumberland Industries December 31 Balance
Sheets(in thousands of dollars)20102009AssetsCash and cash

2. equivalents$91,450$74,625Short-term
investments11,40015,100Accounts
Receivable108,47085,527Inventories38,45034,982 Total
current assets$249,770$210,234 Net fixed
assets67,00042,436Total assets$316,770$252,670Liabilities and
equityAccounts
payable$30,761$23,109Accruals30,40522,656Notes
payable12,71714,217 Total current
liabilities$73,883$59,982Long-term debt80,26363,914 Total
liabilities$154,146$123,896Common stock$90,000Retained
earnings38,774 Total common equity$128,774Total liabilities
and equity$252,670Check for balancing (this should be zero):c.
Construct the statement of cash flows for the most recent year.
Statement of Cash Flows(in thousands of dollars)Operating
ActivitiesNet IncomeAdjustments: Noncash adjustment:
Depreciation Due to changes in working capital: Due to
change in accounts receivable
Kenneth D. Jackson: An increase in accounts receivable from
the pevious year to the current year reduces the net cash
provided by operating activities
Due to change in inventories
Kenneth D. Jackson: An increase in Inventory from the previous
year to the current year reduces the net cash provided by
operation activities Due to change in accounts payable
Mike Ehrhardt: An increase in accounts payable increases cash
flow. Due to change in accruals
Mike Ehrhardt: An increase in accruals is a positive cash
flow.Net cash provided (used) by operating activitiesInvesting
Activities Cash used to acquire gross fixed assets
Christopher Buzzard: Remember, to calculate cash used to
acquire fixed assets, we must include depreciation, i.e., assets

3. purchased are equal to the increase in net assets plus
depreciation. Due to change in short-term investments
Mike Ehrhardt: Selling securities is a positive cash flow, buying
securities is a negative cash flow.Net cash provided (used) by
investing activitiesFinancing Activities Due to change in
long-term debt
Mike Ehrhardt: An increase in debt is a positive cash flow.
Due to change in notes payable
Mike Ehrhardt: An increase in debt is a positive cash flow.
Due to change in common stock
Mike Ehrhardt: An increase in common stock is a positive cash
flow. Payment of common dividendsNet cash provided (used)
by financing activitiesNet increase/decrease in cashAdd: Cash
balance at the beginning of the yearCash balance at the end of
the yearCheck: cash balance in statement of cash flows should
equal the cash on balance sheets as shown here:$91,450
Sheet27/22/12
Financial Statements, Cash Flow, and Taxes: Spreadsheet
Problems
(2-14) Build a Model: Free Cash Flows, EVA, and MVA
Begin with the partial model in the file Ch02 P14 Build a
Model.xls on the textbook's Web site.
a. Cumberland Industries's 2010 sales were $455,000,000;
operating costs (excluding depreciation) were equal to 85% of
sales; net fixed assets were $67,000,000; depreciation amounted
to 10% of net fixed assets; interest expenses were $8,550,000;

4. the state-plus-federal corporate tax rate was 40%; and
Cumberland paid 25% of its net income out in dividends. Given
this information, construct Cumberland's 2010 income
statement. Also calculate total dividends and the addition to
retained earnings. ( Hint: Start with the partial model in the file
and report all dollar figures in thousands to reduce clutter.)
b. Cumberland Industries's partial balance sheets are shown
below. Cumberland issued $10,000,000 of new common stock in
2010. Using this information and the results from part a, fill in
the missing values for common stock, retained earnings, total
common equity, and total liabilities and equity.
Cumberland Industries: Balance Sheets as of December 31
(Thousands of Dollars)
2010
2009
Assets
Cash
$ 91,450
$ 74,625
Short-term investments
11,400
15,100
Accounts receivable
108,470
85,527
Inventories
38,450
34,982
Total current assets
$249,770
$210,234
Net fixed assets
67,000
42,436
Total assets

5. $316,770
$252,670
Liabilities and Equity
Accounts payable
$ 30,761
$ 23,109
Accruals
30,405
22,656
Notes payable
12,717
14,217
Total current liabilities
$ 73,883
$ 59,982
Long-term debt
80,263
63,914
Total liabilities
$154,146
$123,896
Common stock
?
$ 90,000
Retained earnings
?
38,774
Total common equity
?
$128,774
Total liabilities and equity
?
$252,670
Cumberland Industries: Balance Sheets as of December 31
(Thousands of Dollars)View PDF

6. Back to Top P. 81
Analysis of Financial Statements: Spreadsheet Problem
(3–15) Build a Model: Ratio Analysis
Start with the partial model in the file Ch03 P15 Build a
Model.xls from the textbook's Web site. Joshua & White (J&W)
Technologies's financial statements are also shown below.
Answer the following questions. (Note: Industry average ratios
are provided in Ch03 P15 Build a Model.xls.)
a. Has J&W's liquidity position improved or worsened?
Explain.
b. Has J&W's ability to manage its assets improved or
worsened? Explain.
c. How has J&W's profitability changed during the last year? d.
Perform an extended Du Pont analysis for J&W for 2009 and
2010. What do these results tell you?
e. Perform a common size analysis. What has happened to the
composition (that is, percentage in each category) of assets and
liabilities?
f. Perform a percentage change analysis. What does this tell you
about the change in profitability and asset utilization?
Joshua & White Technologies: December 31 Balance Sheets
(Thousands of Dollars)
Assets
2010
2009
Liabilities &Equity
2010
2009
Cash and cash equivalents

7. $ 21,000
$ 20,000
Accounts payable
$ 33,600
$ 32,000
Short-term investments
3,759
3,240
Accruals
12,600
12,000
Accounts receivable
52,500
48,000
Notes payable
19,929
6,480
Inventories
84,000
56,000
Total current liabilities
$ 66,129
$ 50,480
Total current assets

8. $161,259
$127,240
Long-term debt
67,662
58,320
Net fixed assets
218,400
200,000
Total liabilities
$133,791
$108,800
Total assets
$379,659
$327,240
Common stock
183,793
178,440

9. Retained earnings
62,075
40,000
Total common equity
$245,868
$218,440
Total liabilities & equity
$379,659
$327,240

10. Joshua & White Technologies: December 31 Balance Sheets
(Thousands of Dollars)View PDF
Joshua & White Technologies December 31 Income Statements
(Thousands of Dollars)
2010
2009
Sales
$420,000
$400,000
Expenses excluding depr. & amort.
327,600
320,000
EBITDA
$ 92,400
$ 80,000
Depreciation and amortization
19,660
18,000

11. EBIT
$ 72,740
$ 62,000
Interest expense
5,740
4,460
EBT
$ 67,000
$ 57,540
Taxes (40%)
26,800
23,016
Net income
$ 40,200
$ 34,524
Common dividends
$ 18,125
$ 17,262
Joshua & White Technologies December 31 Income Statements
(Thousands of Dollars)View PDF
Back to Top P. 116
Joshua & White Technologies December 31 Income Statements
(Thousands of Dollars) (continued)View PDF
Other Data

12. 2010
2009
Year-end stock price
$ 90.00
$ 96.00
Number of shares (Thousands)
4,052
4,000
Lease payment (Thousands of Dollars)
$20,000
$20,000
Sinking fund payment (Thousands of Dollars)
$ 0
$ 0
Ch03 P15 Build a Model Spring 1, 20137/22/12Chapter 3. Ch
03 P15 Build a ModelExcept for charts and answers that must
be written, only Excel formulas that use cell references or
functions will be accepted for credit. Numeric answers in cells
will not be accepted.Joshua & White Technologies: December
31 Balance Sheets(Thousands of Dollars)Assets20102009Cash
and cash equivalents$21,000$20,000Short-term
investments3,7593,240Accounts
Receivable52,50048,000Inventories84,00056,000 Total current
assets$161,259$127,240 Net fixed assets218,400200,000Total
assets$379,659$327,240Liabilities and equityAccounts
payable$33,600$32,000Accruals12,60012,000Notes
payable19,9296,480 Total current
liabilities$66,129$50,480Long-term debt67,66258,320 Total
liabilities$133,791$108,800Common
stock183,793178,440Retained Earnings62,07540,000 Total
common equity$245,868$218,440Total liabilities and
equity$379,659$327,240Joshua & White Technologies
December 31 Income Statements(Thousands of
Dollars)20102009Sales$420,000$400,000Expenses excluding

13. depr. and amort.327,600320,000
EBITDA$92,400$80,000Depreciation and
Amortization19,66018,000 EBIT$72,740$62,000Interest
Expense5,7404,460 EBT$67,000$57,540Taxes
(40%)26,80023,016 Net Income
Michael C. Ehrhardt: Due to rounding, the numbers calculated
in the Chapter 2 problem may differ slightly from
these.$40,200$34,524Common
dividends$18,125$17,262Addition to retained
earnings$22,075$17,262Other Data20102009Year-end Stock
Price$100.00$96.00# of shares (Thousands)4,0524,000Lease
payment (Thousands of Dollars)$20,000$20,000Sinking fund
payment (Thousands of Dollars)$0$0Ratio
Analysis20102009Industry AvgLiquidity Ratios Current
Ratio2.58 Quick Ratio1.53Asset Management Ratios
Inventory Turnover7.69 Days Sales Outstanding47.45 Fixed
Assets Turnover2.04 Total Assets Turnover1.23Debt
Management Ratios Debt Ratio32.1% Times-interest-earned
ratio15.33 EBITDA coverage ratio4.18Profitability Ratios
Profit Margin8.86% Basic Earning Power19.48% Return on
Assets10.93% Return on Equity16.10%Market Value Ratios
Earnings per shareNA Price-to-earnings ratio10.65 Cash flow
per shareNA Price-to-cash flow ratio7.11 Book Value per
shareNA Market-to-book ratio1.72a. Has Joshua & White's
liquidity position improved or worsened? Explain.b. Has
Joshua & White's ability to manage its assets improved or
worsened? Explain.c. How has Joshua & White's profitability
changed during the last year?d. Perform an extended Du Pont
analysis for Joshua & White for 2008 and 2009. What did you
find?ROE = PM xTA Turnover x Equity
Multiplier20102009e. Perform a common size analysis. What
has happened to the composition (that is, percentage in each
category) of assets and liabilities?Common Size Balance
SheetsAssets20102009Cash and cash equivalentsShort-term
investmentsAccounts ReceivableInventories Total current

14. assets Net fixed assetsTotal assetsLiabilities and
equity20102009Accounts payableAccrualsNotes payable Total
current liabilitiesLong-term debt Total liabilitiesCommon
stockRetained Earnings Total common equityTotal liabilities
and equityCommon Size Income
Statements20102009SalesExpenses excluding depr. and amort.
EBITDADepreciation and Amortization EBITInterest Expense
EBTTaxes (40%) Net Incomef. Perform a percent change
analysis. What does this tell you about the change in
profitability and asset utilization?Percent Change Balance
SheetsBaseAssets20102009Cash and cash equivalentsShort-term
investmentsAccounts ReceivableInventories Total current
assets Net fixed assetsTotal assetsBaseLiabilities and
equity20102009Accounts payableAccrualsNotes payable Total
current liabilitiesLong-term debt Total liabilitiesCommon
stockRetained Earnings Total common equityTotal liabilities
and equityBasePercent Change Income
Statements20102009SalesExpenses excluding depr. and amort.
EBITDADepreciation and Amortization EBITInterest Expense
EBTTaxes (40%) Net Income
Sheet27/22/12