Callaway Golf Company was incorporated in 1982 with the purpose of designing, manufacturing and selling high quality golf clubs. The Company became a publicly traded corporation in 1992. Callaway Golf has evolved over time from a manufacturer of golf clubs to one of the leading manufacturers and distributors of golf equipment and accessories.Callaway designs its products to be technologically advanced and invests substantially in research and development each year. The Company's golf products are designed for golfers of all skill levels including amateur and professional golfers. Callaway Golf generally sells its products to retailers, directly and through its wholly-owned subsidiaries, and to third-party distributors. It also licenses its trademarks and service marks in exchange for a royalty fee to third parties for use on golf related accessories, including golf apparel and footwear, golf gloves, prescription eyewear and practice aids. The Company's products are sold in the United States and in over 100 countries around the world. For purposes of this assignment, assume that you focus is Drive It Long, which is a close competitor to Callaway Golf. Drive It Long similarly sells golf clubs, golf balls and golf accessories. These products are recreational in nature and are therefore discretionary purchases for consumers. Both firms are affected by the fact that consumers are generally more willing to make discretionary purchases of golf products during favorable economic conditions and when consumers are feeling confident and prosperous. Discretionary spending is also affected by factors including general business conditions, interest rates, consumer confidence in future economic conditions, and the availability of consumer credit. Purchases of these firms' products may decline during periods when disposable income is lower, or during periods of actual or perceived unfavorable economic conditions. A significant or prolonged decline in general economic conditions or uncertainties regarding future economic prospects that adversely affect consumer discretionary spending would have a negative impact on these firm's results of operations, financial condition and cash flows.
Assume that you are a Senior Financial Manager for Drive It Long Golf, Inc. A close competitor is Callaway Golf Co. (ELY). You are preparing to address the Board of Directors regarding the current financial picture of the firm, following the release of the firm's Audited Financial Statements. Drive It Long Golf, Inc. has 25,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2016 was $58. Assume that this company's growth rate is 9%. As Drive It Long's Senior Financial Manager, you are assumed to be able to offer an authoritative interpretation of the firm's recent performance.
1.

1. Analyze the financial performance of Drive It Long Golf, Inc. using the following tools:
a. time and trend analysis
b. peer-group analysis
c. two or more ratios financial ratios (introduced in Module Two's assigned readings) in each area that will allow you to evaluate the following four aspects of performance:
iv. Short-term solvency
v. Asset Utilization
vi. Long-term solvency
vii. Profitability
2. Evaluate the firm's financial position using the firm's DuPont Identity, considering:
h. operating efficiency (as measured by profit margin),
i. asset use efficiency (as measured by total asset turnover), and
j. financial leverage (as measured by the equity multiplier).
3. Determine PEG ratio.
k. Construct Drive It Long's PEG ratio, and
l. Evaluate this PEG ratio.

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Financial Ratios, Drive It Long Golf, Inc. 2015 2016 Short-term solvency ratios: Current ratio 1.1 1.15 a. Quick ratio b. 0.65 0.68 0.43 0.42 C. Cash ratio Asset utilization ratios: Period d. Total asset turnover 0.88 Inventory turnover 8.93 e. f. Receivables turnover 23.09 2015 2016 Long-term solvency ratios: g. Total debt ratio 0.38 0.37 Debt-equity ratio 0.58 0.6 h. į. Equity multiplier 1.58 1.6 Period j. Times interest earned ratio 5.73 k. Cash coverage ratio 7.99 Profitability ratios: Period I. Profit margin 11.94% Return on assets 10.53% m. Return on equity 16.85% n. Drive It Long, Inc. Statement of Cash Flows for 2016 Cash, beginning of the year $26,450 Operating activities Net income $50,376 Plus: Depreciation $37,053 Increase in accounts payable 4,883 Increase in other current liabilities 5,161 Less: Increase in accounts receivable ($4,589) Increase in inventory (4,655) Net cash from operating activities $88,229 Investment activities Fixed asset acquisition ($78,233) Net cash from investment activities ($78,233) Financing activities Increase in notes payable ($2,340) Dividends paid (20,000) Increase in long-term debt 15,000 Net cash from financing activities ($7,340) Net increase in cash $2,656 Cash, end of year $29,106