7 8 6 a. Using the financial statements shown below, calculate net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, and return on invested capital for the most recent year. Lan & Chen Technologies: Income Statements for Year Ending December 31 9 (Thousands of Dollars) 10 Sales 11 Expenses excluding depreciation and amortization 12 EBITDA 2013 $945,000 2012 $900,000 812.700 774.000 $132,300 $126,000 13 Depreciation and amortization 14 EBIT 33.100 $99,200 31.500 $94,500 15 Interest Expense 10.470 8.600 16 EBT $88,730 $85,900 17 Taxes (40%) 35.492 34.360 18 Net income $53.238 $51.540 10 20 Common dividends $43,300 $41,230 21 Addition to retained earnings $9,938 $10,310 22 23 Lan & Chen Technologies: December 31 Balance Sheets 24 (Thousands of Dollars) 25 Assets 26 Cash and cash equivalents 27 Short-term investments 28 Accounts Receivable 29 Inventories 30 Total current assets 31 Net fixed assets 32 Total assets 2013 2012 $47,250 $45,000 3,800 3,600 283,500 270,000 141.750 135.000 $476,300 $453,600 330.750 315.000 $807.050 $768,600 33 34 Liabilities and equity 35 Accounts payable $94,500 $90,000 30 Accruals 47,250 45,000 37 Notes payable 26.262 9.000 38 Total current liabilities $168,012 $144,000 39 Long-term debt 94.500 40 Total liabilities $262,512 90,000 $234,000 41 Common stock 444,600 444,600 42 Retained Earnings: 99.938 90.000 insert Table Chart Text Shape Media Comment Collabor Ratio Analysis B C D E H 99.938 $544,538 90.000 $534.600 $807.050 $768.600 00 Financial Statement Retained Eamings 43 Total common equity 44 Total liabilities and equity 45 46 Key Input Data 47 Tax rate 48 49 Net operating working capital 50 51 62 3 583 3 Operating 2013 2013 NOWC current assets NOWC= 2013 NOWC 40% Operating current liabilities 54 2012 NOWC Operating current assets Operating current liabilities 57 59 00 61 02 63 64 60 33533852533SBESRESEFER 2012 NOWC- 2012 NOWC= 58 Total net operating capital 2013 TOC-> NOWC Fixed assets 2013 TOC- 2013 TOC-> F C 2012 TOC-> NOWC + Fixed assets 2012 TOC- Ta 2012 TOC-> 2013 Inv. In TOC 73 Net operating profit after taxes 68 00 2013 Inv. In TOC TOC 70 2013 Inv In TOC- 21 72 67 Investment in total net operating capital 2013 Ta 2012 TOC 74 2013 NOPAT 75 2013 NOPAT 70 2013 NOPAT- Gric EBIT (1-T) Financial Statement Ratio Analysis A C D 2013 NOPAT 77 78 Free cash flow 79 2013 FCF= NOPAT 80 2013 FCF- 81 2013 FCF= 82 83 Return on invested capital Insert Table Chart Text Shape Media Comment Colla Net investment in operating capital G H 84 2013 ROIC- NOPAT 85 2013 80 2013 ROIC ROIC- 187 88 89 Total net operating capital b. Assume that there were 15 million shares outstanding at the end of the year, the year-end closing stock price was $65 per share, and the after-tax cost of capital was 8%. Calculate EVA and MVA for the most recent 90 year. 91 92 Additional Input Data 93 Stock price per share $65.00 94 # of shares (in thousands) 15,000 95 After-tax cost of capital 8.0% 96 97 Market Value Added 98 MVA Stock price x # of shares Total common equity 99 MVA- x 100 MVA- 101 MVA- 102 103 Economic Value Added 104 EVA- 105 EVA- 106 EVA- 107 EVA NOPAT (Operating Capital After-tax cost of capital) T Requirement: Conduct Ratio Analysis Joshua & White Technologies: December 31 Balance Sheets (Thousands of Dollars) Assets 2013 2012 Cash and cash equivalents Short-term investments $21,000 $20,000 3,759 3,240 Accounts Receivable 52,500 48,000 Inventories 84.000 56.000 Total current assets $161,259 $127,240 Net fixed assets 218.400 200.000 Total assets $379.659 $327.240 Liabilities and equity Accounts payable $33,600 $32,000 Accruals 12,600 12,000 Notes payable 19.929 6.480 Total current liabilities $66,129 $50,480 Long-term debt 67,662 58,320 Total liabilities $133,791 $108,800 Common stock 183,793 178,440 62.075 40,000 $245,868 $218,440 $379.659 $327,240 Retained Earnings Total common equity Total liabilities and equity Joshua & White Technologies December 31 Income Statements (Thousands of Dollars) Sales COGS except excluding depr. and amort. Depreciation and Amortization Other operating expenses EBIT 2013 2012 $420,000 $400,000 300,000 298,000 19,660 18,000 27.600 22.000 $72,740 $62,000 Financial Statement Ratio Analysis $72,740 $62,000 EBIT Interest Expense 5,740 EBT $67,000 4.460 $57,540 Taxes (40%) 26,800 23,016 Net Income Common dividends Addition to retained earnings Other Data Year-end Stock Price # of shares (Thousands) Lease payment (Thousands of Dollars) $40.200 $34,524 $18,125 $17,262 $22,075 $17,262 2013 2012 $90.00 $96.00 4,052 4,000 $20,000 $20,000 Sinking fund payment (Thousands of Dollars) $5,000 $5,000 Ratio Analysis 2013 2012 Industry Avg Liquidity Ratios Current Ratio 2.58 Quick Ratio Asset Management Ratios Inventory Turnover (Total COGS/Inventories) Days Sales Outstanding Fixed Assets Turnover 1.53 7.69 47.45 2.04 A Total Assets Turnover 1.23 Debt Management Ratios Debt Ratio (Total debt-to-assets) Liabilities-to-assets ratio Times-interest-earned ratio EBITDA coverage ratio 20.0% 32.1% 15.33 4.18 Profitability Ratios Profit Margin Basic Earning Power Return on Assets Return on Equity Market Value Ratios Earnings per share Price-to-earnings ratio Cash flow per share Drice to each flaucatio 8.86% 19.48% 10.93% 16.10% NA 10.65 NA Financial Statement Ratio Analysis Total Assets Turnover 1.23 Debt Management Ratios Debt Ratio (Total debt-to-assets) Liabilities-to-assets ratio Times-interest-earned ratio EBITDA coverage ratio. Profitability Ratios Profit Margin Basic Earning Power Return on Assets Return on Equity Market Value Ratios Earnings per share Price-to-earnings ratio Cash flow per share Price-to-cash flow ratio Book Value per share Market-to-book ratio 20.0% 32.1% 15.33 4.18 8.86% 19.48% 10.93% 16.10% NA 10.65 NA 7.11 NA 1.72 a. Has Joshua & White's liquidity position improved or worsened? Explain. b. Has Joshua & White's ability to manage its assets improved or worsened? Explain. c. How has Joshua & White's profitability changed during the last year? d. Perform Du Pont analysis for Joshua & White for 2012 and 2013. 2013 2012 ROE= PM X TA Turnover x Equity Multiplier G a. Using the financial statements shown below, calculate net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, and return on invested capital for the most recent year. Lan & Chen Technologies: Income Statements for Year Ending December 31 7 8 9 (Thousands of Dollars) 10 Sales 11 Expenses excluding depreciation and amortization 2013 $945,000 2012 $900,000 812.700 774.000 2345 16 EBITDA Depreciation and amortization EBIT Interest Expense EBT $132,300 $126,000 33.100 31.500 $99,200 $94,500 10.470 8.600 $88,730 $85,900 17 Taxes (40%) 35.492 34.360 18 Net income $53.238 $51.540 19 20 Common dividends $43,300 $41,230 21 Addition to retained earnings $9,938 $10,310 22 23 Lan & Chen Technologies: December 31 Balance Sheets 24 (Thousands of Dollars) 25 Assets 2013 2012 26 Cash and cash equivalents $47,250 $45,000 27 Short-term investments 3,800 3,600 28 Accounts Receivable 283,500 270,000 29 Inventories 141.750 135.000 30 Total current assets $476,300 $453,600 31 Net fixed assets 330.750 315.000 32 Total assets $807.050 $768.600 33 34 Liabilities and equity 35 Accounts payable $94,500 $90,000 30 Accruals 47.250 45,000 37 Notes payable 26.262 9.000 38 Total current liabilities $168,012 $144,000 39 Long-term debt 94.500 90,000 40 Total liabilities $262,512 $234,000 41 Common stock 444,600 444,600 42 Retained Earings 99.938 90.000 Financial Statement Ratio Analysis C 00 Retained Eamings 43 Total common equity 44 Total liabilities and equity 45 Key Input Data 47 Tax rate 40 49 Net operating working capital 62 3523 Operating 2013 NOWC current assets 2013 NOWC- 2013 NOWC Insert Table Chart Test Shape Media Comment 0 H 99.938 $544.538 90.000 $534.600 $807.050 $768,600 40% Operating current liabilities I 2012 NOWC Operating current assets Operating current liabilities 2012 NOWC- 2012 NOWC- 68 Total net operating capital 2013 TOC-> NOWC Fixed assets 2013 TOC-> 2013 TOC-> 02 2012 TOC-> NOWC Fixed assets 64 2012 TOC-> 2012 TOC-> 67 Investment in total net operating capital 2013 2012 2013 Inv. In TOC- TOC TOC 2013 Inv In TOC- 2013 Inv In TOC- Net operating profit after taxes 2013 NOPAT 2013 NOPAT 2013 NOPAT EBIT (1-T) A Financial Statement Ratio Analysis C D 2013 NOPAT 77 78 Free cash flow 79 226 2013 FCF=> NOPAT 2013 FCF 81 2013 FCF=> 82 83 Return on invested capital 04 2013 85 2013 ROIC ROIC- NOPAT 80 2013 ROIC- 87 insert Table Chart Text Shape Media Comment Net investment in operating capital Total net operating capital 88 89 b. Assume that there were 15 million shares outstanding at the end of the year, the year-end closing stock price was $65 per share, and the after-tax cost of capital was 8%. Calculate EVA and MVA for the most recent 90 year. 9 92 Additional Input Data 93 Stock price per share $65.00 94 # of shares (n thousands) 15,000 95 After-tax cost of capital 8.0% 96 97 Market Value Added 98 MVA Stock price 99 MVA- 100 MVA 101 MVA 102 103 Economic Value Added 104 EVA 106 106 107 EVA EVA- EVA- of shares Total common equity NOPAT (Operating Capital After-tax cost of capital) " Requirement: Conduct Ratio Analysis Joshua & White Technologies: December 31 Balance Sheets (Thousands of Dollars) Assets 2013 2012 Cash and cash equivalents Short-term investments $21,000 $20,000 3,759 3,240 Accounts Receivable 52,500 48,000 Inventories 84.000 56.000 Total current assets $161,259 $127,240 Net fixed assets 218.400 200.000 Total assets $379.659 $327.240 Liabilities and equity Accounts payable $33,600 $32,000 Accruals 12,600 12,000 Notes payable 19.929 6,480 Total current liabilities $66,129 $50,480 Long-term debt 67.662 58.320 Total liabilities $133,791 $108,800 Common stock 183,793 178,440 Retained Earnings 62.075 40.000 Total common equity $245,868 $218,440 Total liabilities and equity $379.659 $327.240 Joshua & White Technologies December 31 Income Statements (Thousands of Dollars) Sales COGS except excluding depr. and amort. Depreciation and Amortization Other operating expenses EBIT 2013 2012 $420,000 $400,000 300,000 298,000 19,660 18,000 27.600 22,000 $72,740 $62,000 Financial Statement Ratio Analysis $72,740 $62,000 EBIT 5.740 4.460 Interest Expense EBT $67,000 $57,540 Taxes (40%) 26.800 23.016 Net Income Common dividends Addition to retained earnings Other Data Year-end Stock Price $40.200 $34.524 $18,125 $17,262 $22,075 $17,262 2013 2012 $90.00 $96.00 # of shares (Thousands) 4,052 4,000 Lease payment (Thousands of Dollars) Sinking fund payment (Thousands of Dollars) $20,000 $20,000 $5,000 $5,000 Ratio Analysis Liquidity Ratios Current Ratio Quick Ratio 2013 2012 Industry Avg 2.58 1.53 Asset Management Ratios Inventory Turnover (Total COGS/Inventories) Days Sales Outstanding Fixed Assets Turnover 7.69 47.45 2.04 Total Assets Turnover Debt Management Ratios 1.23 Debt Ratio (Total debt-to-assets) 20.0% Liabilities-to-assets ratio Times-interest-earned ratio EBITDA coverage ratio 32.1% 15.33 4.18 Profitability Ratios Profit Margin Basic Earning Power Return on Assets Return on Equity Market Value Ratios 8.86% 19.48% 10.93% 16.10% Earnings per share Cash flow per share NA Price-to-earnings ratio 10.65 NA Financial Statement Ratio Analysis Total Assets Turnover 1.23 Debt Management Ratios Debt Ratio (Total debt-to-assets) Liabilities-to-assets ratio Times-interest-earned ratio EBITDA coverage ratio Profitability Ratios Profit Margin Basic Earning Power Return on Assets Return on Equity Market Value Ratios Earnings per share Price-to-earnings ratio Cash flow per share Price-to-cash flow ratio Book Value per share Market-to-book ratio 20.0% 32.1% 15.33 4.18 8.86% 19.48% 10.93% 16.10% NA 10.65 NA 7.11 NA 1.72 a. Has Joshua & White's liquidity position improved or worsened? Explain. b. Has Joshua & White's ability to manage its assets improved or worsened? Explain. How has Joshua & White's profitability changed during the last year? . Perform Du Pont analysis for Joshua & White for 2012 and 2013. 2013 2012 ROE PMX TA Turnover x Equity Multiplier