1. Calculate all of the ratios listed in the industry tabular array for East Coast Yachts
Current ratio=CA/CL= 14. 651. 000/19. 539. 000=0. 75Quick Ratio= ( CA-Inventory ) /CL= ( 14651000-6136000 ) /19539000=0. 44 Entire assert turnover=Sales / Entire Assets=167310000/108615000=1. 54 Inventory turnover=Cost of Goods Sold / Inventory=117910000/6136000=19. 22 Receivable turnover=Sales / Histories Receivable=167310000/5473000=30. 57 Debt ratio ( TA-TE ) /TA= ( 108615000-55341000 ) /108615000=0. 49
Debt-equity ratio=TD/TE=33735000/55341000=0. 61Equity multiplier=TA/TE=108615000/55341000=1. 96Interest coverage=23496000/300900=7. 96Net income margin=Net Income / Sales=12562200/167310000=0. 07Tax return on asserts=Net Income / Total Assets=12562200/108615000=0. 12 Return on equity=Net Income / Total Equity=12562200/55341000=0. 23
2. Compare the public presentation of East Coast Yachts to the industry as a whole. For each ratio. remark on why it might be viewed as positive or negative relation to the industry. Suppose you create an stock list ratio calculated as stock list divided by current liabilities. How do you construe this ratio? How does East Coast Yachts comparison to the industry norm? Current ratio is negative because CA smaller than CL
Quick Ratio is positive because the ratio is bigger than the industry upper quartile ratio.
Entire assert turnover is positive the ratio because the ratio is bigger than the industry upper quartile ratio. Inventory turnover is positive because it is higher than the industry norm.
It represents that the company has a high gross revenues based on its stock list.
Receivable turnover is positive because it shows that the company can roll up the gross revenues faster. Debt ratio is positive because it shows that the company has a lower debt hazard than the industry norm. Debt-equity ratio is positive because it shows that the company is less aggressive utilizing debt which means the company has comparatively lower debt hazard. Equity multiplier is negative because it shows that the company has a lower accounting return. Interestcoverage=
Net income border is about the same with the industry norm.
Tax return on assets is positive because the net income per dollar of assets is higher than the industry norm. Tax return on equity is positive because it shows that the company has better shareholder’s menu. Inventory Ratio= CL /Inventory =19539000/6136000=3. 18
Inventory is negative It is still smaller than industry lower quartile It represents that the company has a low gross revenues based on its stock list.
3. Calculate the sustainable growing rate of East Coast Yachts. Calculate external financess needed ( EFN ) and prepare pro forma income statements and balance sheets presuming growing at exactly this rate. Recalculate the ratios in the old inquiry. What do you detect? ROE=ni/te=125622000/55341000=0. 23
B=re/ni=5024800/12562200=0. 4Sustainable Growth rate=ROE*b/1-roe*b=0. 23*0. 4/1-0. 23*0. 40=0. 099
EFN= TA- ( TL+E ) =108615000*1. 099-(19539000*1. 099+3373500+55341000*1. 1099)=3166002
All Current ratio=CA/CL= 14. 651. 000*1. 09/19. 539. 000*1. 09=0. 75 QuickRatio= ( CA-Inventory ) /CL= ( 14651000*1. 09-6136000*1. 09 ) /19539000*1. 09=0. 44 Entire assert turnover=Sales / Entire Assets=167310000*1. 09/108615000*1. 09=1. 54 Inventory turnover=Cost of Goods Sold / Inventory=117910000*1. 09/6136000*1. 09=19. 22 Receivable turnover=Sales / Histories Receivable=167310000*1. 09/5473000*1. 09=30. 57 Debt ratio ( TA-TE ) /TA= ( 108615000-55341000*1. 09 ) /108615000*1. 09=0. 49 Debt-equity ratio=TD/TE=33735000*1. 09/55341000*1. 09=0. 61
Equity multiplier=TA/TE=108615000*1. 09/55341000*1. 09=1. 96Interest coverage=23496000*1. 09/300900*1. 09=8. 93Net income margin=Net Income / Sales=12562200*1. 09/167310000*1. 09=0. 07 Tax return onasserts=Net Income / Total Assets=12562200*1. 09/108615000*1. 09=0. 12 Return on equity=Net Income / Total Equity=12562200*1. 09/55341000*1. 09=0. 23 Merely involvement coverage changed.
4As a practical affair. East Coast Yachts is improbable to be willing to raise external equity capital. in portion because the proprietors don’t want to thin their bing ownership and control places. However. East Coast Yachts is be aftering for a growing rate of 20 per centum following twelvemonth. What are your decisions and recommendations about the feasibleness of East Coast’s enlargement programs?
EFN= TA- ( TL+E ) =108615000*1. 2-(19539000*1. 2+3373500+55341000*1. 2)=8753040
5. Most assets can be increased as a per centum of gross revenues. For case. hard currency can be increased by any sum. However. fixed assets frequently must be increased in specific sums because it is impossible. as a practical affair. to purchase portion of a new works or machine. In this instance a company has a “staircase” or “lumpy” fixed cost construction. Assume that East Coast Yachts is presently bring forthing at 100 per centum Of capacity. As a consequence. to spread out production. the company must put up an wholly new line at a cost of $ 30 million. Calculate the new EFN with this premise. What does this imply about capacity use for East Coast Yachts following twelvemonth?
Depreciation percentage= $ 5. 460. 000 / $ 93. 964. 000= . 0581Pro forma depreciation=0. 581*123964000=7203221
EFN= TA- ( TL+E ) =108615000*1. 2+3000000 -(19539000*1. 2+3373500+55341000*1. 2=23004405 The fixed assets have increased faster than gross revenues. so the capacity use for following twelvemonth will diminish.