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napter 5 T H FIN 301 Syll X 013302031 X X Microsoft V X Solved bcswebdav/pid-416370-dt-content-rid-14910461 1/courses/FIN301 FallSemester2019 margin will rise to 13 percent. What will be the new operating return after the plant's renovation? c. Given that the plant renovation in part (b) occurs and Salco's interest expense rises by $50,000 per year, what will be the return earned on the common stockholders' investment? Compare this rate of return with that earned before the renovation. on assets for Salco 4-11. (Financial analysis) The T. P. Jarmon Company manufactures and sells a line of exclusive sportswear. The firm's sales were $600,000 for the year just ended, and its total assets exceeded $400,000. The company was started by Mr. Jarmon just 10 years ago and has been profitable every year since its inception. The chief financial officer for the firm, Brent Vehlim, has decided to seek a line of credit totaling $80,000 from the firm's bank. In the past, the company has relied on its suppliers to finance a large part of its needs for inventory. However, in recent months tight money conditions have led the firm's suppliers to offer sizable cash discounts to speed up payments for purchases. Mr. Vehlim wants to use the line of credit to replace a large portion of the firm's pay ables during the summer, which is the firm's peak seasonal sales period. The firm's two most recent balance sheets were presented to the bank in support of its loan request. In addition, the firm's income statement for the year just ended was provided. These state- ments are found in the following tables Part 1 The Scope and Environment of Financial Management 136 T. P. Jarmon Company, Balance Sheet for 12/31/2012 and 12/31/2 2012 S 15,000 Cash 6.000 Marketable securities Accounts receivable 42,000 51,000 Inventory 1200 Prepaid rent Total current assets STIS200 286 000 Net olant and eouipnient ntent-rid-14910461 1/courses/FIN301 FallSemester2019 8/4/3/Foundations-of-Finance 163/549 T.P. Jarmon Company, Balance Sheet for 12/31/2012 and 12/31/2013 2013 2012 $14,000 $ 15,000 Cash 6,200 6,000 Marketable securities 33,000 42,000 Accounts receivable 84,000 51,000 Inventory 1,100 1,200 Prepaid rent $138,300 $115,200 Total current assets 270,000 286,000 Net plant and equipment $408,300 $ 57,000 $401,200 $ 48,000 Total assets Accounts payable 13,000 15,000 Notes payable 5,000 6,000 Accruals $ 75,000 $ 69,000 Total current liabilities 150,000 160,000 Long-term debt Common stockholders equity 183,300 172,200 $408,300 $401,200 Total liabilities and equity T.P. Jarmon Company, Income Statement for the Year Ended 12/31/2013 $600,000 Sales (all credit) 460,000 Less cost of goods sold $140,000 Gross profit Less operating and interest expenses $30,000 General and administrative 10,000 Interest 30,000 Depreciation 70,000 Total S 70,000 Earnings before taxes 27,100 s 42,900 Less taxes Net income available to common stockholders 31,800 Less cash dividends S 11.100 Change in retained earnings Jan Fma, associate credit analyst for the Merchants National Bank of Midland, Mlichigan, was 6370-dt-content-rid-14910461 1/courses/FIN301 FallSemester2019 1.87473/Foundatic Microsaft X C Solved: Wh X A Det 163/549 Shonge Jan Fama, associate credit analyst for the Merchants National Bank of Midland, M assigned the task of analyzing Jarmon's loan request. a. Calculate the financial ratios for 2013 corresponding to the industry noms provide RATIO Current ratio NORM 18 Acid-test ratio 09 Debt ratio 0.5 Times interest earned 10.0 Average collection period 20.0 Inventory turnover (based on cost of goods sold) 7.0 Return on common equity 12.0% Operating return on assets 16.8% Operating profit margin 14.0% 1.20 Total asset turnover 1.80 Fixed asset turnover Chapter 4 Evaluating a Firm's Financial Performan b. Which of the ratios reported in the industry determining chether the bank should extend the line of credn? c Prepare Jarmon's staterment of cash flows for the vear ended December 31, 2013 erperet your findings d. Use the information provided by the financial ratios and the cash tlow stitement to decide if you would support making the loan norms do you feel should be most crucial in 12. (Eoomic Value Adled) Stegemolier Inc.'s maiagers want to evaluate the finn's prior rear rformance in terms of its contribution to sharcholiler value This past year, the finn caned an nerating return on investnent of 12 pcrent, compared to an imdheto no of 11 percei It has c estimated that the fi's inestors hase an opotnity cost their fndsof 4 per ishas the smcas tscoeall cost.ofcaal Le tnosoalassesfocthe sear er 5100m