PART 2. FINANCIAL STATEMENT ANALYSIS AND FINANCIAL MODELS Ross and Westerfield want to use financial planning models to prepare a projected (pro forma) financial statement to determine the profitability and financial health of the business for next four years if they go public. The income statement ending Dec 31, 2020, and the companys balance sheet as at Dec 31, 2020, are shown below. Use the financial statement to answer the following questions: INCOME STATEMENT ($millions) Total operating revenues 102 Less expenses 47 Less depreciation 10 Earnings before interest and taxes 45 Less interest 3 Net income before taxes 42 Less taxes @ 24% 10 Net income 32 BALANCE SHEET Assets: Cash 25 Other current assets 38 Net Fixed Assets 30 Total Assets 93 Liabilities and Equities: Accounts payable 15 Long-term debt 18 Stockholders' Equity 60 Total Liabilities & Equities 93 1. What was the companys profit for 2020? 2. Compute the following three profitability ratios and explain to Ross and Westerfield whether the business did better or worse in 2020 relative to the performance of the industry. i. Profit margin ii. Return on assets iii. Return on equity, and iv). calculate and explain operating cash flow The industry ratios are as follows: Industry ratios Profit margin 30.80% Return on assets 32.00% Return on equity 42.50% Current ratio 3 times Total debt ratio 40.0% 3. The business current assets comprise of cash and other current assets whilst its current liabilities comprise of accounts payable. Compute and explain the current ratio and total debt ratio for the business in 2020. 4. Ross believes that if the business goes public large capital can be raised to increase sales and cash flows to maximize the value of the firm. Assuming the business projects a 35% increase in operating revenue (sales) per year what will be the anticipated operating revenue in three years from now (i.e., in 2023)? 5. If net income is projected to increase by 30% per year, what will be the profit margin in 2023? 6. What will be the estimated earnings per share (EPS) in 2023 if 5 million shares are issued? Need to understand question 4, 5 & 6 in detail.