BUS108 Week 4 Assignment: The last two years of financial statements for Carver Industries are as follows
The last two years of financial statements for Carver Industries are as follows:
|
Carver Industries Balance Sheet for December 31, 2012 and 2013 |
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| 2012 | 2013 | |
| Cash | $ 11,250 | $ 650 |
| Accounts receivable | 15,625 | 20,800 |
| Inventories | 36,250 | 59,150 |
| Total current assets | $ 63,125 | $ 80,600 |
| Land | $ 25,000 | $ 33,800 |
| Buildings and equipment | 87,500 | 130,000 |
| Less: Accumulated depreciation | $ (35,000) | $ (49,400) |
| Total fixed assets | 77,500 | 114,400 |
| Total assets | $ 140,625 | $ 195,000 |
| Accounts payable | $ 13,125 | $ 28,600 |
| Short-term bank notes | 21,250 | 61,100 |
| Total current liabilities | $ 34,375 | $ 89,700 |
| Long-term debt | $ 35,938 | $ 29,835 |
| Common stock | 39,375 | 40,950 |
| Retained earnings | 30,938 | 34,515 |
| Common equity | $ 70,313 | $ 75,465 |
| Total debt and equity | $ 140,625 | $ 195,000 |
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| Carver Industries | ||
| Income Statements | ||
| Years Ending December 31, 2012 and 2013 | ||
| 2012 | 2013 | |
| Sales (all credit) | $ 187,500 | $ 400,000 |
| Cost of goods sold | -112,500 | -240,000 |
| Gross profit | $ 75,000) | $ 0,000) |
| Operating expenses | ||
| Fixed cash operating expenses | $ (31,500) | $ (52,500) |
| Variable operating expenses | -18,750 | -40,000 |
| Depreciation expense | -6,750 | -25,000 |
| Total operating expenses | $ (57,000) | $ (117,500) |
| Earnings before interest and taxes | $ 18,000 | $ 42,500 |
| Interest expenses | -5,719 | -9,094 |
| Earnings before taxes | $ 12,281 | $ 33,407 |
| Taxes | -6,141 | -16,141 |
| Net income | $ 6,141 | $ 16,703 |
a. Calculate the following financial ratios for 2012 and 2013: (Answered)
| 2012 | 2013 | Industry Averages | |
| Current ratio | 2 | ||
| Acid-test ratio | 0.8 | ||
| Average collection period | 37 days | ||
| Inventory turnover | 2.5 | ||
| Debt ratio | 58.00% | ||
| Times interest earned | 3.8 | ||
| Operating profit margin | 10.00% | ||
| Total asset turnover | 1.14 | ||
| Fixed asset turnover | 1.4 | ||
| Operating return on assets | 11.40% | ||
| Return on equity | 9.50% |
b. Evaluate the firm’s financial position at the end of 2012 in terms of its liquidity, capital structure, asset management efficiency, and profitability. (Answered)
c. At the end of 2013 the firm has 5,000 shares of common stock outstanding, selling for $15 each. What were the firm’s (i) earnings per share, (ii) price-earnings ratio, and (iii) market-to-book ratio? (Answered)
| No. of shares in common Stock outstanding | 5,000 |
| Market price per share | $15.00 |
d. What observations can you make about the financial condition and performance of the firm from your answers to parts a through c? (Answered)
Course: BUS108 Principles of Finance
School: Community College of Alleghany County