Build a Model 26-11-2018 Chapter: 3 Problem: 15 Joshua & White Technologies: December 31 Balance Sheets (Thousands of Dollars) Assets 2019 2018 Cash and cash equivalents $21,000 $20,000 Short-term investments 3,759 3,240 Accounts Receivable 52,500 48,000 Inventories 84,000 56,000 Total current assets $1,61,259 $1,27,240 Net fixed assets 2,23,097 2,00,000 Total assets $3,84,356 $3,27,240 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 $1,33,791 $1,08,800 Common stock 1,78,440 1,78,440 Retained Earnings 72,125 40,000 Total common equity $2,50,565 $2,18,440 Total liabilities and equity $3,84,356 $3,27,240 Joshua & White Technologies December 31 Income Statements (Thousands of Dollars) 2019 2018 Sales $4,20,000 $4,00,000 COGS except excluding depr. and amort. 3,00,000 2,98,000 Depreciation and Amortization 19,660 18,000 Other operating expenses 27,600 22,000 EBIT $72,740 $62,000 Interest Expense 5,740 4,460 EBT $67,000 $57,540 Taxes (25%) 16,750 14,385 Net Income $50,250 $34,524 Common dividends $18,125 $17,262 Addition to retained earnings $32,125 $17,262 Other Data 2019 2018 Year-end Stock Price $90.00 $96.00 # of shares (Thousands) 4,052 4,000 Lease payment (Thousands of Dollars) $20,000 $20,000 Sinking fund payment (Thousands of Dollars) $5,000 $5,000 Ratio Analysis 2019 2018 Industry Avg Liquidity Ratios Current Ratio 2.58 Quick Ratio 1.53 Asset Management Ratios Inventory Turnover (Total COGS/Inventories) 7.69 Days Sales Outstanding 47.45 Fixed Assets Turnover 2.04 Total Assets Turnover 1.23 Debt Management Ratios Debt Ratio (Total debt-to-assets) 20.0% Liabilities-to-assets ratio 32.1% Times-interest-earned ratio 15.33 EBITDA coverage ratio 4.18 Profitability Ratios Profit Margin 8.86% Basic Earning Power 19.48% Return on Assets 10.93% Return on Equity 16.10% Market Value Ratios Earnings per share NA Price-to-earnings ratio 10.65 Cash flow per share NA Price-to-cash flow ratio 7.11 Book Value per share NA Market-to-book ratio 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 an extended Du Pont analysis for Joshua & White for each year. ROE = PM x TA Turnover x Equity Multiplier 2019 20.05% 11.96% 1.09 1.53 2018 15.80% 8.63% 1.22 1.50 e. Perform a common size analysis. What has happened to the composition (that is, percentage in each category) of assets and liabilities? Common Size Balance Sheets Assets 2019 2018 Cash and cash equivalents Short-term investments Accounts Receivable Inventories Total current assets Net fixed assets Total assets Liabilities and equity 2019 2018 Accounts payable Accruals Notes payable Total current liabilities Long-term debt Total liabilities Common stock Retained Earnings Total common equity Total liabilities and equity Common Size Income Statements 2019 2018 Sales COGS except excluding depr. and amort. Depreciation and Amortization Other operating expenses EBIT Interest Expense EBT Taxes (25%) Net Income f. Perform a percent change analysis. What does this tell you about the change in profitability and asset utilization? Percent Change Balance Sheets Base Assets 2019 2018 Cash and cash equivalents Short-term investments Accounts Receivable Inventories Total current assets Net fixed assets Total assets Base Liabilities and equity 2019 2018 Accounts payable Accruals Notes payable Total current liabilities Long-term debt Total liabilities Common stock Retained Earnings Total common equity Total liabilities and equity Base Percent Change Income Statements 2019 2018 Sales COGS except excluding depr. and amort. Depreciation and Amortization Other operating expenses EBIT Interest Expense EBT Taxes (25%) Net Income