| Solution | 7/16/15 | ||
| Chapter: | 3 | ||
| Problem: | 15 | ||
| Joshua & White Technologies: December 31 Balance Sheets | |||
| (Thousands of Dollars) | |||
| Assets | 2016 | 2015 | |
| Cash and cash equivalents | $21,000 | $20,000 | |
| Short-term investments | 3,759 | 3,240 | |
| Accounts Receivable | 52,500 | 48,000 | |
| Inventories | 84,000 | 56,000 | |
| Total current assets | $161,259 | $127,240 | |
| Net fixed assets | 218,400 | 200,000 | |
| Total assets | $379,659 | $327,240 | |
| Liabilities and equity | |||
| Accounts payable | $33,600 | $32,000 | |
| Accruals | 12,600 | 12,000 | |
| Notes payable | 19,929 | 6,480 | |
| Total current liabilities | $66,129 | $50,480 | |
| Long-term debt | 67,662 | 58,320 | |
| Total liabilities | $133,791 | $108,800 | |
| Common stock | 183,793 | 178,440 | |
| Retained Earnings | 62,075 | 40,000 | |
| Total common equity | $245,868 | $218,440 | |
| Total liabilities and equity | $379,659 | $327,240 | |
| Joshua & White Technologies December 31 Income Statements | |||
| (Thousands of Dollars) | |||
| 2016 | 2015 | ||
| Sales | $420,000 | $400,000 | |
| COGS except excluding depr. and amort. | 300,000 | 298,000 | |
| Depreciation and Amortization | 19,660 | 18,000 | |
| Other operating expenses | 27,600 | 22,000 | |
| EBIT | $72,740 | $62,000 | |
| Interest Expense | 5,740 | 4,460 | |
| EBT | $67,000 | $57,540 | |
| Taxes (40%) | 26,800 | 23,016 | |
| Net Income Michael C. Ehrhardt: Due to rounding, the numbers calculated in the Chapter 2 problem may differ slightly from these. |
$40,200 | $34,524 | |
| Common dividends | $18,125 | $17,262 | |
| Addition to retained earnings | $22,075 | $17,262 | |
| Other Data | 2016 | 2015 | |
| Year-end Stock Price | $90.00 | $96.00 | |
| # of shares (Thousands) | 4,052 | 4,000 | |
| Lease payment (Thousands of Dollars) | $20,000 | $20,000 | |
| Sinking fund payment (Thousands of Dollars) | $5,000 | $5,000 | |
| Ratio Analysis | 2016 | 2015 | Industry Avg |
| Liquidity Ratios | |||
| Current Ratio | 2.58 | ||
| Quick Ratio | 1.53 | ||
| Asset Management Ratios | |||
| Inventory Turnover (Total COGS/Inventories) | 7.69 | ||
| Days Sales Outstanding | 47.45 | ||
| Fixed Assets Turnover | 2.04 | ||
| Total Assets Turnover | 1.23 | ||
| Debt Management Ratios | |||
| Debt Ratio (Total debt-to-assets) | 20.0% | ||
| Liabilities-to-assets ratio | 32.1% | ||
| Times-interest-earned ratio | 15.33 | ||
| EBITDA coverage ratio | 4.18 | ||
| Profitability Ratios | |||
| Profit Margin | 8.86% | ||
| Basic Earning Power | 19.48% | ||
| Return on Assets | 10.93% | ||
| Return on Equity | 16.10% | ||
| Market Value Ratios | |||
| Earnings per share | NA | ||
| Price-to-earnings ratio | 10.65 | ||
| Cash flow per share | NA | ||
| Price-to-cash flow ratio | 7.11 | ||
| Book Value per share | NA | ||
| Market-to-book ratio | 1.72 | ||
| a. 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. | |||
| ROE = | PM x | TA Turnover x Equity Multiplier | |
| 2016 | |||
| 2015 | |||
| e. Perform a common size analysis. What has happened to the composition | |||
| (that is, percentage in each category) of assets and liabilities? | |||
| Common Size Balance Sheets | |||
| Assets | 2016 | 2015 | |
| Cash and cash equivalents | |||
| Short-term investments | |||
| Accounts Receivable | |||
| Inventories | |||
| Total current assets | |||
| Net fixed assets | |||
| Total assets | |||
| Liabilities and equity | 2016 | 2015 | |
| Accounts payable | |||
| Accruals | |||
| Notes payable | |||
| Total current liabilities | |||
| Long-term debt | |||
| Total liabilities | |||
| Common stock | |||
| Retained Earnings | |||
| Total common equity | |||
| Total liabilities and equity | |||
| Common Size Income Statements | 2016 | 2015 | |
| Sales | |||
| COGS except excluding depr. and amort. | |||
| Depreciation and Amortization | |||
| Other operating expenses | |||
| EBIT | |||
| Interest Expense | |||
| EBT | |||
| Taxes (40%) | |||
| Net Income | |||
| f. Perform a percent change analysis. What does this tell you about the change in profitability | |||
| and asset utilization? | |||
| Percent Change Balance Sheets | Base | ||
| Assets | 2016 | 2015 | |
| Cash and cash equivalents | |||
| Short-term investments | |||
| Accounts Receivable | |||
| Inventories | |||
| Total current assets | |||
| Net fixed assets | |||
| Total assets | |||
| Base | |||
| Liabilities and equity | 2016 | 2015 | |
| Accounts payable | |||
| Accruals | |||
| Notes payable | |||
| Total current liabilities | |||
| Long-term debt | |||
| Total liabilities | |||
| Common stock | |||
| Retained Earnings | |||
| Total common equity | |||
| Total liabilities and equity | |||
| Base | |||
| Percent Change Income Statements | 2016 | 2015 | |
| Sales | |||
| COGS except excluding depr. and amort. | |||
| Depreciation and Amortization | |||
| Other operating expenses | |||
| EBIT | |||
| Interest Expense | |||
| EBT | |||
| Taxes (40%) | |||
| Net Income |
