For each of Anne Schippel's observations listed below, develop questions you would ask Dry Supply in order
Question:
For each of Anne Schippel's observations listed below, develop questions you would ask Dry Supply in order to complete the balance sheet analysis.
Observation 1: Accounts receivable have remained in the $114,000 to $118,000 range
**I can't get the right formula to get this percentages. Please show me what I am missing.
Accounts Receivable:
Increase in Accounts
receivable is 3.5% in year 2 and 2.6% in year 3. This
corresponds to increase in sales;
sales increase in Year 2
is 4.6% and increase in year 3 is 2.6%
- When
investment in fixed assets in year 2 has increased by 8.89%,
why this has not translated into similar increase in sales?
Common-sized report
($ in $000S) Review 12/31/20xx Review 12/31/20xy Review 12/31/20xz
Assets | Amount | % | Amount | % | Amount | % |
Cash | $3 | 1.2 | $ 12 | 4.6 | $ 22 | 8.1 |
Accounts Receivable | 114 | 46.9 | 118 | 45.4 | 117 | 43.3 |
Less:Allowance for doubtful accounts | 5 | 2.1 | 5 | 1.9 | 5 | 1.9 |
Net Accounts Receivable | 109 | 44.9 | 113 | 43.5 | 112 | 41.5 |
Inventory | 73 | 30 | 72 | 27.7 | 67 | 24.8 |
Total Current Assets | 185 | 76.1 | 197 | 75.8 | 201 | 74.4 |
Furniture and fixtures | 76 | 31.3 | 75 | 28.8 | 78 | 28.9 |
Leasehold Improvements | 1 | .4 | 1 | .4 | 0 | 0.0 |
Transportation Equipment | 53 | 218 | 70 | 26.9 | 85 | 31.5 |
Gross Fixed Assets | 130 | 53.5 | 146 | 56.2 | 163 | 60.4 |
Less: Accum. Depreciation | 85 | 35 | 97 | 37.3 | 110 | 40.7 |
Net Fixed Assets | 45 | 18.5 | 49 | 18.8 | 53 | 19.6 |
Cash-Value Life Insurance | 13 | 5.3 | 14 | 5.4 | 16 | 5.9 |
Total Assets | $243 | 100 | $260 | 100 | $270 | 100 |
Review 12/31/20xx Review 12/31/20xy Review 12/31/20xz
Liabilities | Amount | % | Amount | % | Amount | % |
Notes Payable bank short- term | $81 | 33.3 | $68 | 26.2 | $59 | 21.8 |
Accounts payable-trade | 42 | 17.3 | 46 | 17.7 | 31 | 11.5 |
Income taxes payable | 5 | 2.1 | 6 | 2.3 | 7 | 2.6 |
Accrued bonuses | 10 | 4.1 | 11 | 4.2 | 12 | 4.4 |
Total current liabilities | 138 | 56.8 | 131 | 50.4 | 109 | 40.4 |
Subordinated debt officers | 48 | 19.8 | 58 | 22.3 | 67 | 24.8 |
Total liabilities | 186 | 76.5 | 189 | 72.7 | 176 | 65.2 |
Net Worth | ||||||
Common stock | 2 | 0.8 | 2 | .8 | 2 | .7 |
Retained earnings | 55 | 22.6 | 69 | 26.5 | 92. | 34.1 |
Total net worth | 57 | 23.5 | 71 | 27.3 | 94 | 34.8 |
Total liabilities and net worth | 243 | 100 | 260 | 100 | 270 | 100 |
Income Statement Spread: DRY SUPPLY
Review 20xx Review 20xy Review 20xz
Amount | % | Amount | % | Amount | % | |
Net sales | 895 | 100 | 937 | 100 | 918 | 100 |
Costs of goods sold | 645 | 72.1 | 667 | 71.2 | 631 | 68.7 |
Gross profit | 250 | 27.9 | 270 | 28.8 | 287 | 31.3 |
Selling, Gen. And admin. Expense | 157 | 17.5 | 173 | 18.5 | 180 | 19.6 |
Officer's compensation | 36 | 4 | 31 | 3.3 | 28 | 3.1 |
Rent Expenses | 15 | 1.7 | 18 | 1.9 | 20 | 2.2 |
Bad Debt Expense | 2 | .2 | 1 | .1 | 0 | 0 |
Profit sharing expense | 7 | .8 | 7 | .7 | 0 | 0 |
Depreciation Expense | 12 | 1.3 | 12 | 1.3 | 13 | 1.4 |
Total operating expense | 229 | 25.6 | 242 | 25.8 | 241 | 26.3 |
Operating income | 21 | 2.3 | 28 | 3. | 46 | 5 |
Other income | 0 | 0 | 0 | 0 | 0 | 0 |
Interest income | 2 | .2 | 2 | .2 | 2 | .2 |
Rental income | 3 | .3 | 3 | .3 | 3 | .3 |
Interest expense | 6 | .7 | 7 | .7 | 11 | 1.2 |
Net profit before tax | 20 | 2.2 | 26 | 2.8 | 40 | 4.4 |
Taxes | 11 | 1.2 | 12 | 1.3 | 17 | 1.9 |
Net profit after tax | 9 | 1 | 14 | 1.5 | 23 | 2.5 |
Fundamentals of Corporate Finance
ISBN: 978-1119371403
4th edition
Authors: Robert Parrino, David S. Kidwell, Thomas Bates