Question
Analysis of Financial Statements
Balance Sheets
EXHIBITS: INPUT DATA (XYZ)
Table 1 Balance Sheets
Assets 2013E 2012 2011 cash $ 85,632 $7,282 $57,600 Acount Receivable 878,000 632,160 351,200 Inventories 1,716,480 1,287,360 715,200 Total current assets $2,680,112 $1,926,802 $ 1,124,000 Gross fixed assets 1,197,160 1,202,950 491,000 Less: accumulated depreciation 380,120 263,160 146,200 Net fixed assets $ 817,040 $ 939,790 $ 344,800 Total assets $3,497,152 $2,866,592 $ 1,468,800 Liabilities and equity Accounts payable $ 436,800 $ 524,160 $ 145,600 Notes payable 300,000 636,808 200,000 Accruals 408,000 489,600 136,000 Total current liabilities
$1,144,800 $1,650,568 $ 481,600 Long term bonds
400,000 723,432 323,432 Total debt $1,544,800 $2,374,000 $ 805,032 Common stock (100,000 shares) 1,721,176 460,000 460,000 Retained earnings 231,176 32,592 203,768 Total common equity $1,952,352 $ 492,592 $ 663,768 Total liabilities and equity $3,497,152 $2,866,592 $ 1,468,800
Analysis of Financial Statements
Income Statements
Table 2
Income Statements
2013E 2012 2011 Sales $7,035,600 $6,034,000 $ 3,432,000 Cost of goods sold 5,875,992 5,528,000 2,864,000 Other expenses
550,000 519,988 358,672 Total operating exp. excl. depreciation and amortization $6,425,992 $6,047,988 $ 3,222,672 EBITDA $ 609,608 $(13,988) $ 209,328 Depreciation and amortization 116,960 116,960 18,900 Earnings before interest and taxes (EBIT) $492,648 $(130,948) $190,428 Interest expense 70,008 136,012 43,828 Earnings before taxes (EBT) $ 422,640 $ (266,960) $ 146,600 Taxes (40%) 169,056 (106,784) 58,640 Net Income $ 253,584 $ (160,176) $ 87,960 Earnings per share (EPS) $ 1.014 $ (1.602) $ 0.880 Dividends per share (DPS) $ 0.220 $ 0.110 $ 0.220 Book value per share (BVPS) $ 7.809 $ 4.926 $ 6.638 Stock price $ 12.17 $ 2.25 $ 8.50 Shares outstanding 250,000 100,000 100,000 Tax rate 40.00% 40.00% 40.00% Lease payments $ 40,000 $ 40,000 $ 40,000 Sinking fund payments 0 0 0
Analysis of Financial Statements
Ratio Analysis
2013E 2012 2011 Industry Average Current ratio * 1.2 2.3 2.7 Quick ratio * 0.4 0.8 1.0 Inventory turnover * 4.7 4.8 6.1 Days sales outstanding (DSO) * 38.2 37.4 32.0 Fixed assets turnover * 6.4 10.0 7.0 Total assets turnover * 2.1 2.3 2.6 Debt-to- assets ratio * 82.8% 54.8% 50.0% Times interest earned (TIE) * -1.0
4.3 6.2 Operating margin * -2.2%
5.6% 7.3% Profit margin * -2.7%
2.6% 3.5% Basic earning power (BEP) * -4.6%
13.0% 19.1% Return on assets(ROA)
* -5.6%
6.0% 9.1% Return on equity (ROE) * -32.5%
13.3% 18.2% Price/earnings (P/E) * -1.4
9.7 14.2 Market/book (M/B) * 0.5 1.3 2.4 Book value per share (BVPS) * $4.93 $6.64 n.a.
Requiremnts:
Note: Question 1 through 5 has been answered completley, thank you very much. Please I am waiting for the question 6 and 7.
6. Use the extended DuPont equation to provide a summary and overview of XYZâs financial condition as projected for 2013.
7. Use the following simplified 2013 balance sheet to show, in general terms, how an improvement in the DSO would tend to affect the stock price. For example, if the company could improve its collection procedures and thereby lower its DSO from 45.6 days to the 32-day industry average without affecting sales, how would that change âripple throughâ the financial statements (shown in thousands below) and influence the stock price?
Accounts receivable $878 Debt $1,545
Other current assets 1,802
Net fixed assets 817 Equity 1,952
Total assets $3,497 Liabilities plus equity $3,497
First, we need to calculate XYZâs daily sales.
Daily sales = Sales / 365
Daily sales = $7,035,600 / 365
Daily sales = $19,275.62
Target A/R = Daily sales à Target DSO
Target A/R = $19,276 Ã 32
Target A/R = $616,820
Freed-up cash = old A/R â new A/R
Freed-up cash = $878,000 â $616,820
Freed-up cash = $261,180
Question
Analysis of Financial Statements
Balance Sheets
EXHIBITS: INPUT DATA (XYZ)
Table 1 Balance Sheets
Assets | 2013E | 2012 | 2011 |
cash | $ 85,632 | $7,282 | $57,600 |
Acount Receivable | 878,000 | 632,160 | 351,200 |
Inventories | 1,716,480 | 1,287,360 | 715,200 |
Total current assets | $2,680,112 | $1,926,802 | $ 1,124,000 |
Gross fixed assets | 1,197,160 | 1,202,950 | 491,000 |
Less: accumulated depreciation | 380,120 | 263,160 | 146,200 |
Net fixed assets | $ 817,040 | $ 939,790 | $ 344,800 |
Total assets | $3,497,152 | $2,866,592 | $ 1,468,800 |
Liabilities and equity | |||
Accounts payable | $ 436,800 | $ 524,160 | $ 145,600 |
Notes payable | 300,000 | 636,808 | 200,000 |
Accruals | 408,000 | 489,600 | 136,000 |
Total current liabilities | $1,144,800 | $1,650,568 | $ 481,600 |
Long term bonds | 400,000 | 723,432 | 323,432 |
Total debt | $1,544,800 | $2,374,000 | $ 805,032 |
Common stock (100,000 shares) | 1,721,176 | 460,000 | 460,000 |
Retained earnings | 231,176 | 32,592 | 203,768 |
Total common equity | $1,952,352 | $ 492,592 | $ 663,768 |
Total liabilities and equity | $3,497,152 | $2,866,592 | $ 1,468,800 |
Analysis of Financial Statements
Income Statements
Table 2
Income Statements
2013E | 2012 | 2011 | |
Sales | $7,035,600 | $6,034,000 | $ 3,432,000 |
Cost of goods sold | 5,875,992 | 5,528,000 | 2,864,000 |
Other expenses | 550,000 | 519,988 | 358,672 |
Total operating exp. excl. depreciation and amortization | $6,425,992 | $6,047,988 | $ 3,222,672 |
EBITDA | $ 609,608 | $(13,988) | $ 209,328 |
Depreciation and amortization | 116,960 | 116,960 | 18,900 |
Earnings before interest and taxes (EBIT) | $492,648 | $(130,948) | $190,428 |
Interest expense | 70,008 | 136,012 | 43,828 |
Earnings before taxes (EBT) | $ 422,640 | $ (266,960) | $ 146,600 |
Taxes (40%) | 169,056 | (106,784) | 58,640 |
Net Income | $ 253,584 | $ (160,176) | $ 87,960 |
Earnings per share (EPS) | $ 1.014 | $ (1.602) | $ 0.880 |
Dividends per share (DPS) | $ 0.220 | $ 0.110 | $ 0.220 |
Book value per share (BVPS) | $ 7.809 | $ 4.926 | $ 6.638 |
Stock price | $ 12.17 | $ 2.25 | $ 8.50 |
Shares outstanding | 250,000 | 100,000 | 100,000 |
Tax rate | 40.00% | 40.00% | 40.00% |
Lease payments | $ 40,000 | $ 40,000 | $ 40,000 |
Sinking fund payments | 0 | 0 | 0 |
Analysis of Financial Statements
Ratio Analysis
2013E | 2012 | 2011 | Industry Average | |
Current ratio | * | 1.2 | 2.3 | 2.7 |
Quick ratio | * | 0.4 | 0.8 | 1.0 |
Inventory turnover | * | 4.7 | 4.8 | 6.1 |
Days sales outstanding (DSO) | * | 38.2 | 37.4 | 32.0 |
Fixed assets turnover | * | 6.4 | 10.0 | 7.0 |
Total assets turnover | * | 2.1 | 2.3 | 2.6 |
Debt-to- assets ratio | * | 82.8% | 54.8% | 50.0% |
Times interest earned (TIE) | * | -1.0 | 4.3 | 6.2 |
Operating margin | * | -2.2% | 5.6% | 7.3% |
Profit margin | * | -2.7% | 2.6% | 3.5% |
Basic earning power (BEP) | * | -4.6% | 13.0% | 19.1% |
Return on assets(ROA) | * | -5.6% | 6.0% | 9.1% |
Return on equity (ROE) | * | -32.5% | 13.3% | 18.2% |
Price/earnings (P/E) | * | -1.4 | 9.7 | 14.2 |
Market/book (M/B) | * | 0.5 | 1.3 | 2.4 |
Book value per share (BVPS) | * | $4.93 | $6.64 | n.a. |
Requiremnts:
Note: Question 1 through 5 has been answered completley, thank you very much. Please I am waiting for the question 6 and 7.
6. Use the extended DuPont equation to provide a summary and overview of XYZâs financial condition as projected for 2013.
7. Use the following simplified 2013 balance sheet to show, in general terms, how an improvement in the DSO would tend to affect the stock price. For example, if the company could improve its collection procedures and thereby lower its DSO from 45.6 days to the 32-day industry average without affecting sales, how would that change âripple throughâ the financial statements (shown in thousands below) and influence the stock price?
Accounts receivable $878 Debt $1,545
Other current assets 1,802
Net fixed assets 817 Equity 1,952
Total assets $3,497 Liabilities plus equity $3,497
First, we need to calculate XYZâs daily sales.
Daily sales = Sales / 365
Daily sales = $7,035,600 / 365
Daily sales = $19,275.62
Target A/R = Daily sales à Target DSO
Target A/R = $19,276 Ã 32
Target A/R = $616,820
Freed-up cash = old A/R â new A/R
Freed-up cash = $878,000 â $616,820
Freed-up cash = $261,180