After Dan's analysis of East Coast Yachts' cash flow (at the end of our previous chapter), Larissa approached Dan about the company's performance and future growth plans. First Larissa wants to find out how East Coast Yachts is performing relative to its peers. Additionally, she wants to find out the future financing necessary to fund the company's growth. In the past, East Coat Yachts experienced difficulty in financing its growth plan, in part because of poor planning. In fact, the company had to turn down several large jobs because its facilities were unable to handle the additional demand. Larissa hoped that Dan would be able to estimate the amount of capital the company would have to raise next year so that East Coat Yachts would be better prepared to funds its expansion plans.

To get Dan started with his analyses, Larissa provided the following financial statements. Dan then gathered the industry ratios for the yacht manufacturing industry.

Income Statement

Sales	$555,984,000
Cost of Goods Sold	391,824,000
Selling, General, and administrative	66,441,600
Depreciation	18,144,000
EBIT	79,574,400
Interest Expense	10,000,800
EBT	69,573,600
Taxes	27,829,440
Net Income	41,744,160
Dividends	15,795,000
Retained Earnings	25,949,160

Balance Sheet

Current Assets		Current Liabilities
Cash and Equivalents	$10,108,800	Accounts Payable	$23,814,400
Accounts Receivable	16,983,200	Notes Payable	16,852,500
Inventory	18,317,860	Accrued Expenses	5,566,500
Other	1,065,600	Total Current Liabilities	46,233,400
Total Current Assets	46,475,460
Fixed Assets		Long-term debt	131,904,000
Property, Plant, equp	415,827,000	Total Long term debt	131,904,000
Less Accum Deprec.	(103,496,300)
Net Property, plan, equ	312,330,700
Intangible Assets	6,156,000	Stockholder's Equity
Total Fixed Assets	318,486,700	Preferred Stock	2,700,000
		Common Stock	34,167,000
		Capital Surplus	25,633,000
		Accumulated Retain earning	167,524,760
		Less Treasury Stock	(43,200,000)
		Total Equity	186,824,760
Total Assets	$364,962,160	Total Liabilities/Sharehold Equ	364,962,160

Calculated Ratios

Liquidity or Short-Term Solvency Ratios

Calculate and compare to industry ratios

	East Coast Yachts	Lower Quartile	Median	Upper Quartile	Positive, Negative, or Neutral Relative to Industry
Current Ratio	1.01	0.86	1.51	1.97	Negative
Quick Ratio	0.61	0.43	0.75	1.01	Negative

Asset Management or Turnover Ratios

Calculate and compare to industry ratios:

	East Coast Yachts	Lower Quartile	Median	Upper Quartile	Positive, Negative, or Neutral Relative to Industry
Assets Turnover	1.52	1.10	1.27	1.46	Positive
Inventory Turnover	21.39	12.18	14.38	16.43	Positive
Receivables Turnover	32.74	10.25	17.65	22.43	Positive

Long-Term Solvency Ratios

Calculate and compare to industry ratios:

	East Coast Yachts	Lower Quartile	Median	Upper Quartile	Positive, Negative, or Neutral Relative to Industry
Debt Ratio	.49	0.32	0.47	0.61	Neutral
Debt-Equity Ratio	.96	0.51	0.83	1.03	Neutral
Equity Multiplier	1.96	1.51	1.83	2.03	Neutral
Interest Coverage	7.96	5.72	8.21	10.83	Negative

Profitability Measures

Calculate and compare to industry ratios:

	East Coast Yachts	Lower Quartile	Median	Upper Quartile	Positive, Negative, or Neutral Relative to Industry
Profit Margin	7.51%	5.02%	7.48%	9.05%	Neutral
Return on Assets	11.44%	7.05%	10.67%	14.16%	Neutral
Return on Equity	22.34%	9.06%	14.32%	20.83%	Positive

Based on your calculations and comparisons above, how would you characterize East Coast Yacht’s performance relative to its industry?

Answer rating: 100% (QA)

Answer East cost yachts has low liquidity compared to industry Liquidity is extr... View the full answer