After Han's analysis of LSUS corporation' cash flow, Amanda, the CEO of the company, approached Han...

 

 

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After Han's analysis of LSUS corporation' cash flow, Amanda, the CEO of the company, approached Han about the company's performance and future growth plans. First, Amanda wants to find out how LSUS corporation is performing relative to its peers. Additionally, she wants to find out the future financing necessary to fund the company's growth. In the past, LSUS corporation experienced difficulty in financing its growth plan, in large part because of poor planning. In fact, the company had to tum down several large jobs because its facilities were unable to handle the additional demand. Amanda hoped that Han would be able to estimate the amount of capital the company would have to raise next year so that LSUS corporation would be better prepared to fund its expansion plans. To get Han started with his analyses, Amanda provided the following financial statements. Han then gathered the industry ratios for the LSUS Corporation industry. 2019 Income Statement LSUS Corporation Sales S611.582.000 Cost of goods sold Selling, general, and administrative Depreciaion 431,006,000 73,085,700 19.958 400 S87.531,00 11.000,900 S 76.531.000 30,612 400 ERIT Interest expense EBT Taxes Net income $45.918400 $ 17,374.500 S 28,544.100 Dividends Retained camings 2019 Balance Sheet LSUS Corporation Current assets Current liabilities Cash and equivalents Accounts receivable $11,119,700 18,681,500 20,149,650 Accounts payable Accrued expenses Total current liabilities $ 44,461,550 6.123.200 S 50,584,750 Inventory 1,172,200 $ $1,123,050 Other Total current assets $169.260.000 Long-term debt Total long-term liabilities $169,260,000 Fixed assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Intangible assets and others Total fixed assets $457,509,600 (113,845,900) $343,663,700 6,772,000 $350.435,700 Stockholders' equity Preferred stock S1,970,000 37,583,700 28,116,300 Common stock Capital surplus Accumulated retained 161,564.000 earnings Less treasury stock Total equity (47,520.000) SI81714.000 $401.558.750 Total assets S401.558.750 Total liabilities and shareholders" equity LSUS Corporation Industry Ratios UPPER QUARTILE 1.97 LOWER QUARTILE MEDIAN 86 43 L10 12.18 10 25 151 75 127 14.38 Current tatio Quick ratio Total asset turnover Inventory turnover 101 1.46 16.43 17.65 2243 61 144 244 Receivables turnover Debt ratio 32 56 Debt-equity ratio Equity multiplier 2.13 8.21 3.72 10 83 Interest coveTage Profit margn 9.05 1416. 26.41 5 02 7.48. 10.67. 7.05 14.06 Returm on assets Return on equity 19.32 01%20Analysis%20(2).pdf Inc Before examining the case questions below, research en how the corporate financial policies could affect corporate outcomes such as profits, risks etc. Use proper references. 1. LSUS corporation uses a small percentage of preferred stock as a source of financing. In calculating the ratios for the company, should preferred stock be included as part of the company's total equity? 2. Calculate all of the ratios listed in the industry table for LSUS corporation. 3. Compare the performance of LSUS corporation to the industry as a whole. For each ratio, comment on why it might be viewed as positive or negative relative to the industry. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How would you interpret this ratio? How does LSUS corporation compare to the industry average for this ratio? 4. Calculate the sustainable growth rate for LSUS corporation. Calculate external funds needed (EFN) and prepare pro forma income statements and balance sheets assuming growth at precisely this rate. Recalculate the ratios in the previous question. What do vou observe? 5. As a practical matter, LSUS corporation is unlikely to be willing to raise extemal equity capital, in part because the shareholders don't want to dilute their existing ownership and control positions. However, LSUS corporation is planning for a growth rate of 20 percent next year. What are your conclusions and recommendations about the feasibility of LSUS corporation's expansion plans? 6. Most assets can be increased as a percentage of sales. For instance, cash can be increased by any amount. However, fixed assets offen must be increased in specific amounts since it is impossible, as a practical matter, to buy part of a new plant or machine. In this cuse, a company has a "staircase" or "lumpy" fixed cost structure. Assune that the LSUS corporation is currently producing at 100 percent of capacity and sales are expected to grow at 20 percent. As a result, to expand production, the company must set up an entirely new line at a cost of $95,000,000. Prepare the pro forma income statement and balance sheet. What is the new EFN with these assumptions? What does this imply about capacity utilization for LSUS corporation next year? After Han's analysis of LSUS corporation' cash flow, Amanda, the CEO of the company, approached Han about the company's performance and future growth plans. First, Amanda wants to find out how LSUS corporation is performing relative to its peers. Additionally, she wants to find out the future financing necessary to fund the company's growth. In the past, LSUS corporation experienced difficulty in financing its growth plan, in large part because of poor planning. In fact, the company had to tum down several large jobs because its facilities were unable to handle the additional demand. Amanda hoped that Han would be able to estimate the amount of capital the company would have to raise next year so that LSUS corporation would be better prepared to fund its expansion plans. To get Han started with his analyses, Amanda provided the following financial statements. Han then gathered the industry ratios for the LSUS Corporation industry. 2019 Income Statement LSUS Corporation Sales S611.582.000 Cost of goods sold Selling, general, and administrative Depreciaion 431,006,000 73,085,700 19.958 400 S87.531,00 11.000,900 S 76.531.000 30,612 400 ERIT Interest expense EBT Taxes Net income $45.918400 $ 17,374.500 S 28,544.100 Dividends Retained camings 2019 Balance Sheet LSUS Corporation Current assets Current liabilities Cash and equivalents Accounts receivable $11,119,700 18,681,500 20,149,650 Accounts payable Accrued expenses Total current liabilities $ 44,461,550 6.123.200 S 50,584,750 Inventory 1,172,200 $ $1,123,050 Other Total current assets $169.260.000 Long-term debt Total long-term liabilities $169,260,000 Fixed assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Intangible assets and others Total fixed assets $457,509,600 (113,845,900) $343,663,700 6,772,000 $350.435,700 Stockholders' equity Preferred stock S1,970,000 37,583,700 28,116,300 Common stock Capital surplus Accumulated retained 161,564.000 earnings Less treasury stock Total equity (47,520.000) SI81714.000 $401.558.750 Total assets S401.558.750 Total liabilities and shareholders" equity LSUS Corporation Industry Ratios UPPER QUARTILE 1.97 LOWER QUARTILE MEDIAN 86 43 L10 12.18 10 25 151 75 127 14.38 Current tatio Quick ratio Total asset turnover Inventory turnover 101 1.46 16.43 17.65 2243 61 144 244 Receivables turnover Debt ratio 32 56 Debt-equity ratio Equity multiplier 2.13 8.21 3.72 10 83 Interest coveTage Profit margn 9.05 1416. 26.41 5 02 7.48. 10.67. 7.05 14.06 Returm on assets Return on equity 19.32 01%20Analysis%20(2).pdf Inc Before examining the case questions below, research en how the corporate financial policies could affect corporate outcomes such as profits, risks etc. Use proper references. 1. LSUS corporation uses a small percentage of preferred stock as a source of financing. In calculating the ratios for the company, should preferred stock be included as part of the company's total equity? 2. Calculate all of the ratios listed in the industry table for LSUS corporation. 3. Compare the performance of LSUS corporation to the industry as a whole. For each ratio, comment on why it might be viewed as positive or negative relative to the industry. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How would you interpret this ratio? How does LSUS corporation compare to the industry average for this ratio? 4. Calculate the sustainable growth rate for LSUS corporation. Calculate external funds needed (EFN) and prepare pro forma income statements and balance sheets assuming growth at precisely this rate. Recalculate the ratios in the previous question. What do vou observe? 5. As a practical matter, LSUS corporation is unlikely to be willing to raise extemal equity capital, in part because the shareholders don't want to dilute their existing ownership and control positions. However, LSUS corporation is planning for a growth rate of 20 percent next year. What are your conclusions and recommendations about the feasibility of LSUS corporation's expansion plans? 6. Most assets can be increased as a percentage of sales. For instance, cash can be increased by any amount. However, fixed assets offen must be increased in specific amounts since it is impossible, as a practical matter, to buy part of a new plant or machine. In this cuse, a company has a "staircase" or "lumpy" fixed cost structure. Assune that the LSUS corporation is currently producing at 100 percent of capacity and sales are expected to grow at 20 percent. As a result, to expand production, the company must set up an entirely new line at a cost of $95,000,000. Prepare the pro forma income statement and balance sheet. What is the new EFN with these assumptions? What does this imply about capacity utilization for LSUS corporation next year? After Han's analysis of LSUS corporation' cash flow, Amanda, the CEO of the company, approached Han about the company's performance and future growth plans. First, Amanda wants to find out how LSUS corporation is performing relative to its peers. Additionally, she wants to find out the future financing necessary to fund the company's growth. In the past, LSUS corporation experienced difficulty in financing its growth plan, in large part because of poor planning. In fact, the company had to tum down several large jobs because its facilities were unable to handle the additional demand. Amanda hoped that Han would be able to estimate the amount of capital the company would have to raise next year so that LSUS corporation would be better prepared to fund its expansion plans. To get Han started with his analyses, Amanda provided the following financial statements. Han then gathered the industry ratios for the LSUS Corporation industry. 2019 Income Statement LSUS Corporation Sales S611.582.000 Cost of goods sold Selling, general, and administrative Depreciaion 431,006,000 73,085,700 19.958 400 S87.531,00 11.000,900 S 76.531.000 30,612 400 ERIT Interest expense EBT Taxes Net income $45.918400 $ 17,374.500 S 28,544.100 Dividends Retained camings 2019 Balance Sheet LSUS Corporation Current assets Current liabilities Cash and equivalents Accounts receivable $11,119,700 18,681,500 20,149,650 Accounts payable Accrued expenses Total current liabilities $ 44,461,550 6.123.200 S 50,584,750 Inventory 1,172,200 $ $1,123,050 Other Total current assets $169.260.000 Long-term debt Total long-term liabilities $169,260,000 Fixed assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Intangible assets and others Total fixed assets $457,509,600 (113,845,900) $343,663,700 6,772,000 $350.435,700 Stockholders' equity Preferred stock S1,970,000 37,583,700 28,116,300 Common stock Capital surplus Accumulated retained 161,564.000 earnings Less treasury stock Total equity (47,520.000) SI81714.000 $401.558.750 Total assets S401.558.750 Total liabilities and shareholders" equity LSUS Corporation Industry Ratios UPPER QUARTILE 1.97 LOWER QUARTILE MEDIAN 86 43 L10 12.18 10 25 151 75 127 14.38 Current tatio Quick ratio Total asset turnover Inventory turnover 101 1.46 16.43 17.65 2243 61 144 244 Receivables turnover Debt ratio 32 56 Debt-equity ratio Equity multiplier 2.13 8.21 3.72 10 83 Interest coveTage Profit margn 9.05 1416. 26.41 5 02 7.48. 10.67. 7.05 14.06 Returm on assets Return on equity 19.32 01%20Analysis%20(2).pdf Inc Before examining the case questions below, research en how the corporate financial policies could affect corporate outcomes such as profits, risks etc. Use proper references. 1. LSUS corporation uses a small percentage of preferred stock as a source of financing. In calculating the ratios for the company, should preferred stock be included as part of the company's total equity? 2. Calculate all of the ratios listed in the industry table for LSUS corporation. 3. Compare the performance of LSUS corporation to the industry as a whole. For each ratio, comment on why it might be viewed as positive or negative relative to the industry. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How would you interpret this ratio? How does LSUS corporation compare to the industry average for this ratio? 4. Calculate the sustainable growth rate for LSUS corporation. Calculate external funds needed (EFN) and prepare pro forma income statements and balance sheets assuming growth at precisely this rate. Recalculate the ratios in the previous question. What do vou observe? 5. As a practical matter, LSUS corporation is unlikely to be willing to raise extemal equity capital, in part because the shareholders don't want to dilute their existing ownership and control positions. However, LSUS corporation is planning for a growth rate of 20 percent next year. What are your conclusions and recommendations about the feasibility of LSUS corporation's expansion plans? 6. Most assets can be increased as a percentage of sales. For instance, cash can be increased by any amount. However, fixed assets offen must be increased in specific amounts since it is impossible, as a practical matter, to buy part of a new plant or machine. In this cuse, a company has a "staircase" or "lumpy" fixed cost structure. Assune that the LSUS corporation is currently producing at 100 percent of capacity and sales are expected to grow at 20 percent. As a result, to expand production, the company must set up an entirely new line at a cost of $95,000,000. Prepare the pro forma income statement and balance sheet. What is the new EFN with these assumptions? What does this imply about capacity utilization for LSUS corporation next year? After Han's analysis of LSUS corporation' cash flow, Amanda, the CEO of the company, approached Han about the company's performance and future growth plans. First, Amanda wants to find out how LSUS corporation is performing relative to its peers. Additionally, she wants to find out the future financing necessary to fund the company's growth. In the past, LSUS corporation experienced difficulty in financing its growth plan, in large part because of poor planning. In fact, the company had to tum down several large jobs because its facilities were unable to handle the additional demand. Amanda hoped that Han would be able to estimate the amount of capital the company would have to raise next year so that LSUS corporation would be better prepared to fund its expansion plans. To get Han started with his analyses, Amanda provided the following financial statements. Han then gathered the industry ratios for the LSUS Corporation industry. 2019 Income Statement LSUS Corporation Sales S611.582.000 Cost of goods sold Selling, general, and administrative Depreciaion 431,006,000 73,085,700 19.958 400 S87.531,00 11.000,900 S 76.531.000 30,612 400 ERIT Interest expense EBT Taxes Net income $45.918400 $ 17,374.500 S 28,544.100 Dividends Retained camings 2019 Balance Sheet LSUS Corporation Current assets Current liabilities Cash and equivalents Accounts receivable $11,119,700 18,681,500 20,149,650 Accounts payable Accrued expenses Total current liabilities $ 44,461,550 6.123.200 S 50,584,750 Inventory 1,172,200 $ $1,123,050 Other Total current assets $169.260.000 Long-term debt Total long-term liabilities $169,260,000 Fixed assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Intangible assets and others Total fixed assets $457,509,600 (113,845,900) $343,663,700 6,772,000 $350.435,700 Stockholders' equity Preferred stock S1,970,000 37,583,700 28,116,300 Common stock Capital surplus Accumulated retained 161,564.000 earnings Less treasury stock Total equity (47,520.000) SI81714.000 $401.558.750 Total assets S401.558.750 Total liabilities and shareholders" equity LSUS Corporation Industry Ratios UPPER QUARTILE 1.97 LOWER QUARTILE MEDIAN 86 43 L10 12.18 10 25 151 75 127 14.38 Current tatio Quick ratio Total asset turnover Inventory turnover 101 1.46 16.43 17.65 2243 61 144 244 Receivables turnover Debt ratio 32 56 Debt-equity ratio Equity multiplier 2.13 8.21 3.72 10 83 Interest coveTage Profit margn 9.05 1416. 26.41 5 02 7.48. 10.67. 7.05 14.06 Returm on assets Return on equity 19.32 01%20Analysis%20(2).pdf Inc Before examining the case questions below, research en how the corporate financial policies could affect corporate outcomes such as profits, risks etc. Use proper references. 1. LSUS corporation uses a small percentage of preferred stock as a source of financing. In calculating the ratios for the company, should preferred stock be included as part of the company's total equity? 2. Calculate all of the ratios listed in the industry table for LSUS corporation. 3. Compare the performance of LSUS corporation to the industry as a whole. For each ratio, comment on why it might be viewed as positive or negative relative to the industry. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How would you interpret this ratio? How does LSUS corporation compare to the industry average for this ratio? 4. Calculate the sustainable growth rate for LSUS corporation. Calculate external funds needed (EFN) and prepare pro forma income statements and balance sheets assuming growth at precisely this rate. Recalculate the ratios in the previous question. What do vou observe? 5. As a practical matter, LSUS corporation is unlikely to be willing to raise extemal equity capital, in part because the shareholders don't want to dilute their existing ownership and control positions. However, LSUS corporation is planning for a growth rate of 20 percent next year. What are your conclusions and recommendations about the feasibility of LSUS corporation's expansion plans? 6. Most assets can be increased as a percentage of sales. For instance, cash can be increased by any amount. However, fixed assets offen must be increased in specific amounts since it is impossible, as a practical matter, to buy part of a new plant or machine. In this cuse, a company has a "staircase" or "lumpy" fixed cost structure. Assune that the LSUS corporation is currently producing at 100 percent of capacity and sales are expected to grow at 20 percent. As a result, to expand production, the company must set up an entirely new line at a cost of $95,000,000. Prepare the pro forma income statement and balance sheet. What is the new EFN with these assumptions? What does this imply about capacity utilization for LSUS corporation next year?

Answer rating: 100% (QA)

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