The Johnson company wants to increase its sales and demands additional borrowing.The company's management and investors are
Question:
The Johnson company wants to increase its sales and demands additional borrowing. The company's management and investors are concerned about the firm's survival and expansion plans. The president wants to improve the company's financial situation and ensure that the company can survive in the short term. The company's actual balance sheet for 2015 is given, and the estimated balance sheet for 2016 is based on additional financing.
You are a newly hired Berkeley MBA graduate, and the head of the company asks you to perform an analysis of the company's finances and suggest steps or actions Johnson should take to improve his financial situation.
Balance
Projected 2016 REAL 2015
Found $ 85.632 $ 7.282
Receivables 878,000 632,160
Stocks 1,716,480 1,287,360
Total current assets $ 2,680,112 $ 1,926,802
Gross fixed assets 1,197,160 1,202,950
Less accumulated depreciation 380,120 263,160
Net fixed assets $817,040 $939,790
Total assets $3,497,152 $2,866,592
Obligation and egalitarianism
Accounts payable $436,800 $524,160
Debt securities 300,000 636,808
Accruals 408,000 489,600
Total current liabilities $1,144,800 $1,650,568
Long-term debt 400,000 723,432
Common stock 1,721,176 460,000
Retained earnings 231.176 32.592
Total equity $1,952,352 $492,592
Total liabilities and equity $3,497,152 $2,866.592
Income statement
2016
Sale $7,035,600
Cost of goods sold 5.875.992
Other expenses 550,000
Total operating costs
$6,425,992 excluding depreciation
EBITDA $609,608
Depreciation 116,960
EBITDA $492,648
Interest expense 70.008
EBT $ 422,640
Taxes ( 40%) 169,056
Net Gelir $253.584
Ratio analysis
Industry
2016 Average
current 2.7 ´
Fast 1.0 ´
Stock turnover rate 6.1 ´
Day sales in receivables 32.0
Total asset turnover 2.6 ´
Total Debt rate 50% Multiplication of interest earned 6.2 ´
Operating margin (EBIT) 7.3%
Net Profit Margin 3.5%
LENGTH %9,1
ROE %18,2
No Gross Margin
Answer the questions below
Calculate and analyze rates for Johnson in 2016 and compare them to industry average rates. (30%)
What do you think about the financial health of the company? Explain in detail and offer your suggestions to improve the company's health. (15%)
What is the company's internal and sustainable growth rate if it withdraws or retains 70% of its earnings? What do these growth rates indicate? (20%)
Calculate 2016 Free Cash Flow for Johnson (25%)
As a banker, will you loan Johnson in 2016? Explain in detail the financial reasons based on the ratios. (10%)
Fundamentals of Financial Management
ISBN: 978-1285867977
14th edition
Authors: Eugene F. Brigham, Joel F. Houston