1. What are the firm's debt? 2. What is the firms times interest earned? 3. What is...
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Balance Sheets Assets 2022 2021 Cash $ 52,000 $ 57,600 Accounts receivable 402,000 351,200 Inventories 836,000 715,200 Total current assets Gross fixed assets Less : Accumulated depreciation Net fixed assets Total assets $1,290,000 $1,124,000 527,000 491,000 166,200 146,200 $ 360,800 $ 344,800 $1,650,800 $1,468,800 Liabilities and Equity Accounts payable $ 175,200 $ 145,600 Notes payable 225,000 Accruals 140,000 200,000 136,000 Total current liabilities $ 540,200 $ 481,600 Total liabilities Long-term debt Common stock (100,000 shares) Retained earnings 424,612 323,432 $ 964,812 $ 805,032 460,000 225,988 460,000 203,768 Total equity $ 685,988 $ 663,768 Total liabilities and equity $1,650,800 $1,468,800 Income Statements 2022 2021 Sales $3,850,000 Cost of goods sold (3,250,000) $3,432,000 (2,864,000) Other expenses ( 430,300) ( 340,000) Depreciation ( 20,000) ( 18,900) Total operating costs ($3,700,300) ($3,222,900) Earnings before interest and taxes (EBIT) $ 149,700 $ 209,100 Interest expense ( 76,000) ( 62,500) Earnings before taxes (EBT) $ 73,700 $ 146,600 Taxes (40%) ( 29,480) ( 58,640) Net income $ 44,220 $ 87,960 Earning per share (EPS) $ 0.442 $ 0.880 Statement of Cash Flows (2022) Operating Activities Net income (NI) Additions to NI (sources of cash) Depreciation Increase in accounts payable $ 44,220 20,000 29,600 4,000 Increase in accruals Subtractions from NI (uses of cash) Increases in accounts receivable ( 50,800) Increase in inventories Net cash flow from operations Long-Term Investing Activities Investment in fixed assets (120,800) $(73,780) $(36,000) Financing Activities Increase in notes payable Increase in long-term debt $ 25,000 101,180 Payment of cash dividends ( 22,000) Net cash flow from financing Net change in cash Cash at beginning of the year Cash at end of the year $104,180 $ (5,600) 57,600 $ 52,000 Other Data 2022 December 31 stock price $ 6.00 2021 $ 8.50 Number of shares 100,000 100,000 Dividends per share $0.22 $0.22 Lease payments $40,000 $40,000 Industry average data for 2021: Ratio Current Quick Industry Average 2.7X 1.0X Inventory turnover Days sales outstanding (DSO) 6.0X 32.0 days Fixed assets turnover 10.7X Total assets turnover 2.6X Debt ratio 50.0% Time interest earned (TIE) 2.5X Fixed charge coverage 2.1X Net profit margin 3.5% Return on assets (ROA) 9.1% Return on equity (ROE) 18.2% Price/earnings 14.2X Market/book 1.4X Balance Sheets Assets 2022 2021 Cash $ 52,000 $ 57,600 Accounts receivable 402,000 351,200 Inventories 836,000 715,200 Total current assets Gross fixed assets Less : Accumulated depreciation Net fixed assets Total assets $1,290,000 $1,124,000 527,000 491,000 166,200 146,200 $ 360,800 $ 344,800 $1,650,800 $1,468,800 Liabilities and Equity Accounts payable $ 175,200 $ 145,600 Notes payable 225,000 Accruals 140,000 200,000 136,000 Total current liabilities $ 540,200 $ 481,600 Total liabilities Long-term debt Common stock (100,000 shares) Retained earnings 424,612 323,432 $ 964,812 $ 805,032 460,000 225,988 460,000 203,768 Total equity $ 685,988 $ 663,768 Total liabilities and equity $1,650,800 $1,468,800 Income Statements 2022 2021 Sales $3,850,000 Cost of goods sold (3,250,000) $3,432,000 (2,864,000) Other expenses ( 430,300) ( 340,000) Depreciation ( 20,000) ( 18,900) Total operating costs ($3,700,300) ($3,222,900) Earnings before interest and taxes (EBIT) $ 149,700 $ 209,100 Interest expense ( 76,000) ( 62,500) Earnings before taxes (EBT) $ 73,700 $ 146,600 Taxes (40%) ( 29,480) ( 58,640) Net income $ 44,220 $ 87,960 Earning per share (EPS) $ 0.442 $ 0.880 Statement of Cash Flows (2022) Operating Activities Net income (NI) Additions to NI (sources of cash) Depreciation Increase in accounts payable $ 44,220 20,000 29,600 4,000 Increase in accruals Subtractions from NI (uses of cash) Increases in accounts receivable ( 50,800) Increase in inventories Net cash flow from operations Long-Term Investing Activities Investment in fixed assets (120,800) $(73,780) $(36,000) Financing Activities Increase in notes payable Increase in long-term debt $ 25,000 101,180 Payment of cash dividends ( 22,000) Net cash flow from financing Net change in cash Cash at beginning of the year Cash at end of the year $104,180 $ (5,600) 57,600 $ 52,000 Other Data 2022 December 31 stock price $ 6.00 2021 $ 8.50 Number of shares 100,000 100,000 Dividends per share $0.22 $0.22 Lease payments $40,000 $40,000 Industry average data for 2021: Ratio Current Quick Industry Average 2.7X 1.0X Inventory turnover Days sales outstanding (DSO) 6.0X 32.0 days Fixed assets turnover 10.7X Total assets turnover 2.6X Debt ratio 50.0% Time interest earned (TIE) 2.5X Fixed charge coverage 2.1X Net profit margin 3.5% Return on assets (ROA) 9.1% Return on equity (ROE) 18.2% Price/earnings 14.2X Market/book 1.4X
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