Chapter 4 Measuring Corporate Performance 117 TABLE 4.11 Income statement for The Hobby Horse Net sales $3,351 1,990 Company Inc., year ending Cost of goods sold March 31, 2019 (figures in Selling, general, and administrative expenses 1,211 $ millions) Depreciation expense 159 Earnings before interest and taxes (EBIT) - $ 9 Net interest expense 37 Taxable income -$ 46 Income taxes 3 Net income -$ 49 Allocation of net income Addition to retained earnings -$ 49 O Dividends TABLE 4.12 Consolidated Assets Mar. 31, 2019 Mar. 31, 2018 balance sheet for The Hobby Horse Company Inc. (figures in Current assets 5 millions) Cash and marketable securities $ 14 $ 72 Receivables 176 194 Inventories 479 203 Total current assets $ 669 $ 469 Fixed assets Property, plant, and equipment $1,077 $ Less accumulated depreciation 154 130 Net fixed assets $ 923 $ 780 Total assets $ 1,592 $ 1,249 Liabilities and Shareholders' Equity Mar. 31, 2019 Mar. 31, 2018 Current liabilities Debt due for repayment $ 484 $ 222 Accounts payable 94 58 Other current liabilities 102 85 Total current liabilities $ $ 365 Long-term debt $ 236 159 Stockholders' equity Common stock and other paid-in capital $ 155 155 Retained earnings 521 570 Total stockholders' equity $ 676 $ 725 Total liabilities and stockholders' equity $1,592 $1,249 Note: Column sums subject to rounding error.MINICASE Burchetts Green had enjoyed the bank training course, but it was good Mr. Green was familiar with the HH story. Founded in 1990, it to be starting his first real job in the corporate lending group. Earlier had rapidly built up a chain of discount stores selling materials for that morning the boss had handed him a set of financial statements for crafts and hobbies. However, last year a number of new store open- The Hobby Horse Company Inc. (HH). "Hobby Horse," she said, "has ings coinciding with a poor Christmas season had pushed the com- a $45 million loan from us due at the end of September, and it is likely pany into loss. Management had halted all new construction and to ask us to roll it over. The company seems to have run into some put 15 of its existing stores up for sale. rough weather recently, and I have asked Furze Platt to go down there Mr. Green decided to start with the 6-year summary of HH's this afternoon and see what is happening. It might do you good to go balance sheet and income statement (Table 4.10). Then he turned along with her. Before you go, take a look at these financial statements to examine in more detail the latest position (Tables 4.1 1 and 4.12). and see what you think the problems are. Here's a chance for you to What appear to be the problem areas in HH? Do the financial use some of that stuff they taught you in the training course." ratios suggest questions that Ms. Platt and Mr. Green need to address? TABLE 4.10 Financial 2015 2014 highlights for The Hobby Horse 2019 2018 2017 2016 Company Inc., year ending Net sales 3,351 3,314 2,845 2,796 2,493 2, 160 March 31 EBIT -9 312 256 243 212 156 Interest 37 63 65 58 48 46 Taxes 3 60 46 43 39 34 Net profit -49 189 145 142 125 76 Earnings per share -0.15 0.55 0.44 0.42 0.37 0.25 Current assets 669 469 491 435 392 423 Net fixed assets 923 780 753 680 610 536 Total assets 1,592 1,249 1,244 1, 115 1,002 959 Current liabilities 680 365 348 302 276 320 Long-term debt 236 159 297 311 319 315 Stockholders' equity 676 725 599 502 407 324 Number of stores 240 221 211 184 170 157 Employees 13,057 11,835 9,810 9,790 9,075 7,825