BA 620 Managerial Finance
Group Problem Set 1: This problem Set is based on materials covered in module 1/week 1. It is designed for you to demonstrate your understanding of basic financial statements, financial statement analysis, break-even concepts, financial and operating leverages. Before you start this assignment, please review weeks 1 and 2 materials thoroughly.
Finance date of Adams Stores, Inc. for the year ending 2016 and 2017.
Items |
2016 |
2017 |
Sales |
$3,432,000 |
$5,834,400 |
Cash |
9,000 |
7,282 |
Other Expenses |
340,000 |
720,000 |
Retained Earnings |
203,768 |
97,632 |
Long-term debt |
323,432 |
1,000,000 |
Cost of goods sold |
2,864,000 |
4,980,000 |
Depreciation |
18,900 |
116,960 |
Short-term investments |
48,600 |
20,000 |
Fixed Assets |
491,000 |
1,202,950 |
Interest Expenses |
62,500 |
176,000 |
Shares outstanding (par value |
||
= $4.60) |
100,000 |
100,000 |
Market Price of stock |
8.50 |
6 |
Accounts Receivable |
351,200 |
632,160 |
Accounts payable |
145,600 |
324,000 |
Inventory |
715,200 |
1,287,360 |
Notes Payable |
200,000 |
720,000 |
Accumulated Depreciation |
146,200 |
263,160 |
Accruals |
136,000 |
284,960 |
Tax Rate |
40% |
40% |
Instructions:
As a group, complete the following activities using the financial information above:
Part 1: Financial Statements
Part 2: Financial Statement Analysis
Current ratio
Quick ratio
Inventory turnover (times)
Average collection period (days)
Total asset turnover (times)
Debt ratio
Times interest earned
Gross profit margin
Net profit margin
Return on total assets
Return on equity
P/E ratio
Return on equity using DuPont Analysis
Part 3: Break-even, Financial and Operating Leverages
Johnson Products, Inc.
Income Statement
For the Year Ended December 31, 2018
Sales (40,000 bags at $50 each) ……………………………. |
$2,000,000 |
||
Less: Variable costs (40,000 bags at $25) ……………. |
1,000,000 |
||
Fixed costs …………………………………………………….. |
600,000 |
||
Earnings before interest and taxes ………………………… |
400,000 |
||
Interest expense ………………………………………………….. |
120,000 |
||
Earnings before taxes …………………………………………. |
280,000 |
||
Income tax expense (20%) …………………………………… |
56,000 |
||
Net income ………………………………………………………… |
$ 224,000 |
||
Based on the information above, calculate (show all calculations and responses in good form):
Specific Instructions: