QUESTION " 8d" ONLY AND SHOWFULL WORKAND EXPLANATION!! if you use excel please attach file in answer

8. You are given with the following information of a firm "Hungry Jack" in food industry. Assume that the firm did not issue preferred stocks while the firm may have some foreign subsidiaries overseas. This industry tends to have gross profit margin such as 25% and other set-up costs are also relatively high due to the production and technology. The R&D (Research and Development) costs are entirely reported as operating expenses according to the GAAP.

Balance Sheet (in millions)

2014 20152016

Assets

Cash 130210 70

Marketable securities51200200

Accounts Receivable220350200

Inventory106210781250

Plant, Building, and Equipment (net) 87012031190

Investments in affiliates 0230320

Total Assets 233332713230

Liabilities

Short-term debts 10713030

Advances from customers121326534

Accounts payable 5851092357

Interest payable 7529862

Tax payable 147120128

Other Accrued Expenses 201535

Bonds payable 628876550

Stockholders' Equity

Common stock 4012011270

Additional paid-in capital 71154140

Retained earning 178 59124

Total liabilities and equities 233332713230

Income Statement(in millions)

2014 20152016

Net Sales492950185883

Cost of Goods Sold221521092310

Selling and General Expenses 7718101059

Depreciation Expense213169484

Interest Expense397109221

Income Tax Expense 275237304

Net Income1058 15841505

a)Perform the Ratio Analysis for the firm. (Present all ratios you know.) Will the accounting policy on revenue recognition influence the ratios? Why or why not?

Current Ratio = Current Assets/Current Liab.

a.2013: 1463/813=1.799

b.2014: 1838/1548=1.187

c.2015: 1720/921=1.868

Quick Ratio = Quick Assets/Current Liab

a.2013: 401/813=0.493

b.2014: 760/1548=0.491

c.2015: 470/921=0.510

.

A/R Turnover = Net Sales/AR

a.2013: 4929/ 220= 22.405

b.2014: 5018/ 350=14.337

c.2015: 5883/ 200=29.415

Fixed Asset Turnover = Net Sales/Net Fixed Assets =

a.2013: 4929/1051=4.689

b.2014: 5018/ 1613=3.111

c.2015: 5883/ 1460=4.029

Inventory Turnover = COGS/Inventory =

a.2013: 2215/ 1062=2.086

b.2014: 2109/1078=1.956

c.2015: 2310/1250= 1.848

Gross Profit Margin = (Net Sales-COGS)/Net Sales =

a.2013: (4929-2215)/ (4929)=0.55062

b.2014: (5018-2109)/ (5018)=0.57971

c.2015: (5883-2310)/ (5883)=0.60734

Net Profit Margin: net income/sales

a)2013: 1058/ 4929 = 21.465%

b)2014: 1584/ 5018 = 31.566%

c)2015: 1505/ 5883 = 25.582%

Total Asset Turnover: sales/assets

d)2013: 4929 /2333 = 2.113

e)2014: 5018 /3271 = 1.534

f)2015: 5883 /3230 = 1.831

ROA: (net profit margin)(total asset turnover)

g)2013: 21.465% (2.113) = 45.36%

h)2014: 31.566% (1.534) = 48.42%

i)2015: 25.582% (1.831) = 46.841%

Equity Multiplier: total assets/total equity

j)2013: 2333 / 650 = 3.59

k)2014: 3271 / 414 = 7.90

l)2015: 3230 / 1534 = 2.11

ROE: ROA*Equity Multiplier (or net income/total equity)

m)2013: (45.36%)(3.59) =162.84%

n)2014: (48.42%)(7.90) = 382.52%

o)2015: (46.84%) (2.11) = 98.83%

The accounting policy on revenue recognition will influence the ratios because if they are a company that records revenue when earned (accrual) rather than when their paid, their accounts receivable account is going to be higher than cash as opposed to if they recognize revenue when they're paid.

b)Show the Common-Size Statements for Company Hungry Jack.

Look in excel sheet for work.

c)Given your result in a), what is your opinion on the firm's performance so far? What is the firm's strategy in raising capital? What are the firm's possible business and financial strategies in your opinions?

So far the firm's ratios are improving over the years and they appear to be more profitable. In raising capital they appear to be buying back a lot of their common stock. As for possible business and financial strategies they appear to be putting a lot of their cash into marketable securities which is increasing their overall assets. They've also been making a lot more investments in affiliates.

d)Given the above information, what will be possible dividend per share for 2016 of Company Hungry Jack? Suppose the firm has 6 million shares of stock issued in the market, what is the possible required rate of return for their stock if you based on the shareholders' equity of 2016?