Quantitative Assignment, Week 1. Part 1

Determine in which statement the following items belong.

Balance
Sheet / Income
Statement / Account Name / Value
Accounts payable / 4800
Accounts receivable / 9600
Accumulated depreciation / 34000
Cash / 16550
Common stock (10,000 shares) / 45000
Cost of goods sold / 5,750
Depreciation expense / 500
Earnings before taxes / ?????
General & admin expense / 850
Gross buildings & equipment / 122000
Gross profits / 26,250
Interest expense / 3,300
Inventories / 6500
Long-term debt / 55000
Net buildings & equipment / 88000
Net income / ?????
Operating income (EBIT) / ?????
Retained earnings / 15250
Sales / 32,000
Short-term notes payable / 600
Taxes / 1,440
Total assets / ?????
Total current assets / ?????
Total current liabilities / 5400
Total equity / ?????
Total liabilities / ?????
Total liabilities and equity / 120650

Use the items above to compose a Balance Sheet and Income Statement on the next page.

Task 1. Fill in the missing amounts.
Balance SheetYear 20X1
ASSETS
Current assets
9600
Total current assets / 3
Net buildings & equipment / 88000
Total assets / 120650
LIABILITIES AND EQUITY
Liabilities
Short-term notes payable
4800
Total current liabilities
55000
Total liabilities / 60400
Equity
45000
Total equity / 60250
120650
Income Statement
Year Ending 20X1
Sales
5,750
26,250
General & admin expense
Operating income (EBIT)
Interest expense
21,600
1,440
Net income / 20,160

Quantitative Assignment, Week 1. Part 2

Task 2. Fill in the missing equations. List the Financial Statement where the data is found. Solve the ratios.
ASSUME THAT THE STOCK PRICE IS $6.50 per share.
Equations / Statement? / Amounts / Answer
How liquid is the firm?
Current ratio / Current Assets/
Current Liabilities
Quick ratio or Acid Test
Cash ratio / Cash & Marketable Sec.
÷ Current Liabilites
Net Working Captial / Current Assets
- Current Liabilities
Is management generating adequate operating profits on the firm’s assets?
Operating income / EBITDA
return on investment / ÷TA
Operating profit margin
Gross profit margin
Accounts receivable turnover
or avg. collection period
Total Asset Turnover / Sales
÷ Total Assets
Fixed Asset Turnover / Sales
÷ Fixed Assets
Inventory turnover
How is the firm financing its assets?
Debt to total assets
Debt to Equity
Times interest earned
Are the owners (stockholders) receiving an adequate return on their investment?
Return on common equity
Market to Book / Market Value of stock / Stock Market
÷ Total Equity per share
Earnings per share / Net Income
÷ Common stock shares / Stock Market
Price earnings ratio / Common Stock Price / Stock Market
÷ EPS

Quantitative Assignment, Week 1. Part 3.

Ratio Analysis

Evaluate the performance of this company relative to its peers (cross-sectional analysis) and over time (time series analysis). Poor (P), Satisfactory (S), or Good (G). Calculate the percentage change and percent difference in each evaluation.

RATIO / Year1 / Year2 / Industry Norm / Cross-Section Evaluation / Trend or
Time Series Evaluation
Liquidity: / % D / % Δ
Current Ratio / 6.0x / 4.0x / 5.0x
Acid-test (Quick) Ratio / 3.25x / 1.92x / 3.0x
Operating efficiency: / % D / % Δ
Total Asset Turnover / .5x / .56x / .75x
Average Collection Period / 137 days / 107 days / 90 days
Inventory Turnover / 1.27x / 1.36x / 2.2x
Fixed Asset Turnover / 1.0x / 1.04x / 1.00x
Financing: / % D / % Δ
Debt Ratio / 33% / 34.60% / 33%
Times Interest Earned / 5.0x / 5.63x / 7.0x
Rate of return on common stockholders’ investment: / % D / % Δ
Return on Common Equity / 7.50% / 10.50% / 9.00%

Make an evaluation of the areas of Liquidity, Asset Management, Leverage, and Profitability.

Economic Value Added

Determine the missing data. Calculate the EVA for the following data. Assume the cost of capital is 12 percent (0.12), capital invested is 1810, and the tax rate is 40% (0.40). All data is millions of dollars.

Net Sales / $3000
Operating Expenses / 2616.2
Depreciation / 100
EBIT / 283.8
Interest Expense / ?
EBT / ?
Taxes / 78.3
Net Income / ?