Build a Model

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 $161,259 $127,240

Net fixed assets 223,097 200,000

Total assets $384,356 $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 178,440 178,440

Retained Earnings 72,125 40,000

Total common equity $250,565 $218,440

Total liabilities and equity $384,356 $327,240

Joshua & White Technologies December 31 Income Statements (Thousands of Dollars) 2019 2018

Sales $420,000 $400,000

COGS except excluding depr. and amort 300,000 298,000

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 Dc $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 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 11/26/2018 b. Has Joshua & White's ability to manage its assets improved or worsened? Explain