Compare the financial ratios of East Coast Yachts to the industry as a whole by the following
Question:
Compare the financial ratios of East Coast Yachts to the industry as a whole by the following categories.
a) Short-term solvency or liquidity measures
b) Long-term solvency measures
c) Asset management or turnover measures
d) Profitability measures
Also comment on the performance of each category (a) to (d) above and overall performance of East Coast Yachts based on your analyses.
Calculate the sustainable growth rate of East Coast Yachts. Prepare pro forma income statement and balance sheet. Assume that sales, cost of goods sold, other expenses, current assets (cash, accounts receivable, and inventory), fixed assets, and current liabilities (accounts payable and notes payable) grow at precisely this rate. Also assume that depreciation, interest, long-term debt, and common stock remain the same. The firm’s tax rate is 25%. Compute external fund needed (EFN). (Note that the total equity used to compute the return on equity (ROE) is taken from an ending balance sheet. When you compute the sustainable growth rate, you need to use the following formula: Sustainable growth rate = ROExb 1−(ROExb) , where b is the retention or plowback ratio.)
Finance Applications and Theory
ISBN: 978-0077861681
3rd edition
Authors: Marcia Cornett, Troy Adair