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Unformatted text preview: and Equity $ 6,500,000 7,000,000 Total assets $40,500,000 a. Using the equation from the chapter, calculate the external funds needed for next year. b. Construct the firm’s pro forma balance sheet for next year and confirm the external funds needed you calculated in part (a). c. Calculate the sustainable growth rate for the company. d. Can Optical Scam eliminate the need for external funds by changing its dividend policy? What other options are available to the company to meet its growth objectives? 14. Days’ Sales in Receivables A company has net income of $187,000, a profit margin of 9.2 percent, and an accounts receivable balance of $159,300. Assuming 75 percent of sales are on credit, what is the company’s days’ sales in receivables? CHAPTER 3 Financial Statements Analysis and Long-Term Planning 83 ros82361_ch03.indd ros82361_ch03.indd 83 5/27/08 10:15:14 AM Confirming Pages
www.mhhe.com/rwj 15. Ratios and Fixed Assets The Burk Company has a ratio of long-term debt to long-term debt plus equity of 0.55 and a current ratio of 1.30. Current liabilities are $925, sales are $5,720, profit margin is 9.5 percent, and ROE is 19.25 percent. What is the amount of the firm’s net fixed assets? 16. Calculating the Cash Coverage Ratio FVA Inc.’s net income for the most recent year was $12,850. The tax rate was 34 percent. The firm paid $3,820 in total interest expense and deducted $4,690 in depreciation expense. What was FVA’s cash coverage ratio for the year? 17. Cost of Goods Sold Sexton Corp. has current liabilities of $280,000, a quick ratio of 1.2, inventory turnover of 6.4, and a current ratio of 1.4. What is the cost of goods sold for the company? 18. Common-Size and Common-Base Year Financial Statements In addition to common-size financial statements, common-base year financial statements are often used. Common-base year financial statements are constructed by dividing the current year account value by the base year account value. Thus, the result shows the growth rate in the account. Using the financial statements below, construct the common-size balance sheet and common-base year balance sheet for the company. Use 2007 as the base year.
JARROW CORPORATION 2007 and 2008 Balance Sheets Assets 2007 Current assets Cash Accounts receivable Inventory Total 2008 Current liabilities Accounts payable Notes payable Total Long-term debt Owners’ equity Common stock and paid-in surplus Accumulated retained earnings Total Total liabilities and owners’ equity Liabilities and Owners’ Equity 2007 2008 $ 9,453 18,635 34,807 $ 62,895 $ 9,688 19,680 37,976 $ 67,344 $ 27,386 19,543 $ 46,929 $ 40,000 $ 29,186 20,438 $ 49,624 $ 55,000 Fixed assets Net plant and equipment $ 25,000 208,156 $233,156 $ 25,000 213,770 $238,770 $257,190 $276,050 Total assets $320,085 $343,394 $320,085 $343,394 19. Full-Capacity Sales Pumpkin Mfg., Inc., is currently operating at only 89 percent of fixed asset capacity. Current sales are $605,000. How fast can sales grow before any new fixed assets are needed?...
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This note was uploaded on 10/28/2009 for the course FINA 505 taught by Professor Deborahcernauskas during the Summer '09 term at Northern Illinois University.
- Summer '09