Question

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Use the following financial statements for Lake of Egypt Marina, Inc.

LAKE OF EGYPT MARINA, INC.
Balance Sheet as of December 31, 2018 and 2017
(in millions of dollars)
	2018				2017					2018				2017
Assets									Liabilities and Equity
Current assets:									Current liabilities:
Cash and marketable securities	$	60			$	28			Accrued wages and taxes	$	40			$	32
Accounts receivable		50				36			Accounts payable		50				40
Inventory		140				132			Notes payable		50				32
Total	$	250			$	196			Total	$	140			$	104
Fixed assets:									Long-term debt:	$	11			$	124
Gross plant and equipment	$	300			$	220			Stockholders’ equity:
Less: Depreciation		75				40			Preferred stock (8 million shares)	$	8			$	8
Net plant and equipment	$	225			$	180			Common stock and paid-in surplus		60				60
									(60 million shares)
Other long-term assets		25				24			Retained earnings		281				104
Total	$	250			$	204			Total	$	349			$	172
Total assets	$	500			$	400			Total liabilities and equity	$	500			$	400

LAKE OF EGYPT MARINA, INC.
Income Statement for Years Ending December 31, 2018 and 2017
(in millions of dollars)
	2018				2017
Net sales (all credit)	$	700			$	500
Less: Cost of goods sold		210				140
Gross profits	$	490			$	360
Less: Other operating expenses		49				30
Earnings before interest, taxes, depreciation, and amortization (EBITDA)		441				330
Less: Depreciation		35				25
Earnings before interest and taxes (EBIT)	$	406			$	305
Less: Interest		56				35
Earnings before taxes (EBT)	$	350			$	270
Less: Taxes		105				81
Net income	$	245			$	189
Less: Preferred stock dividends	$	8			$	8
Net income available to common stockholders	$	237			$	181
Less: Common stock dividends		60				60
Addition to retained earnings	$	177			$	121
Per (common) share data:
Earnings per share (EPS)	$	3.950			$	3.017
Dividends per share (DPS)	$	1.000			$	1.000
Book value per share (BVPS)	$	5.683			$	2.733
Market value (price) per share (MVPS)	$	15.050			$	12.850

Calculate the following ratios for Lake of Egypt Marina, Inc. as of year-end 2018. (Use sales when computing the inventory turnover and use total equity when computing the equity multiplier. Round your answers to 2 decimal places. Use 365 days a year.)

Calculate the following ratios for Lake of Egypt Marina, Inc. as of year-end 2018. (Use sales when computing the inventory turnover and use total equity when computing the equity multiplier. Round your answers to 2 decimal places. Use 365 days a year.)'

LAKE OF EGYPT MARINA, INC.
a.	Current ratio		times
b.	Quick ratio		times
c.	Cash ratio		times
d.	Inventory turnover		times
e.	Days’ sales in inventory		days
f.	Average collection period		days
g.	Average payment period	t	days
h.	Fixed asset turnover		times
i.	Sales to working capital	not attempted	times
j.	Total asset turnover	not attempted	times
k.	Capital intensity		times
l.	Debt ratio		%
m.	Debt-to-equity		times
n.	Equity multiplier		times
o.	Times interest earned		times
p.	Cash coverage		times
q.	Profit margin		%
r.	Gross profit margin		%
s.	Operating profit margin		%
t.	Basic earnings power		%
u.	ROA		%
v.	ROE		%
w.	Dividend payout		%
x.	Market-to-book ratio		times
y.	PE ratio

Answer 1

d.Inventory turnover = sales / Average inventory

Average inventory = ( 140 + 132 ) / 2 = 136

Sales=700

Inventory turnover = 700 / 132 = 5.30 times

.

e.Days’ sales in inventory= 365 / Inventory turnover

Days’ sales in inventory = 365 / 5.30 = 68.87 days

.

f. Average collection period = Average Receivables / Sales per days

Average Receivables= ( 50 + 36 ) / 2 = 43

.

Sales per days = 700 / 365 = 1.918

Average collection period = 43 / 1.918 = 22.42 days

.

g. Average payment period = Average payable / Cogs per days

Average payable = (40 + 40 ) / 2 = 45

Cogs per days = 210 / 365 = 0.575

Average payment period = 45 / 0.575 = 78.26 days

.

h. Fixed asset turnover = Sales / Average Fixed assets

Sales = 700

Average Fixed assets = ( 250 + 204 ) / 2 = 227

Fixed asset turnover = 700 / 227 = 3.08 times

.

i. Sales to working capital = sales / Net working capital

sales = 700

Net working capital = current assets - current liabilities = 250 - 140 = 110

Sales to working capital = 700 / 110 = 6.36 times

.

j.Total asset turnover = Sales / Average total assets

Average total assets = (500 + 400 ) / 2 = 450

Total asset turnover = 700 / 450 = 1.56 times

.

k. Capital intensity = total assets / sales

Capital intensity = 500 / 750 = 0.67 times

.

l. Debt ratio = Debt / total assets

Debt = 140 + 11 = 151

Debt ratio = 151 / 500 = 0.302 = 30.20%

.

m. Debt-to-equity = Total debt / equity

Equity = 349

Debt-to-equity = 151 / 349 = 0.43 times

.

n.Equity multiplier = total assets / Total equity

Equity multiplier = 500 / 349 = 1.43 times

.

O)-Times interest earned ratio

Times interest earned ratio = Earnings before interest and taxes / Interest expenses

= $350 / $56

= 6.25 Times

.

(P)-Cash Coverage Ratio

Cash Coverage Ratio = [Earnings before interest & tax + Depreciation Expenses] / Interest Expenses

= [EBIT + Depreciation Expenses] / Interest Expenses

= [$350 + $35 ] / $56

= $385 / $56 = 6.88 Times

.

(Q)-Profit Margin

Profit Margin = [Net Income / Sales] x 100

= [$245 / $700] x 100 = 35%

.

(R)-Gross Profit Margin

Gross Profit Margin = [Gross Profit / Sales] x 100

= [$490 / $700 ] x 100 = 70%

.

s. Operating profit margin

Operating Profit Margin = [Operating Profit / Sales] x 100

= [$406 / $700 ] x 100 = 58%

.

T. . Basic earnings power = earnings before interest and taxes (EBIT) / total assets

Basic earnings power = 406 / 500 = 0.812 = 81.20%

.

u. ROA = Net income / average assets

ROA = 245 / 500 = 0.49 = 49%

.

v. ROE = Net income / Average equity

Average equity = 349 + 172 ) / 2 = 260.5

ROE = 245 / 260.5 = 0.9405 = 94.05%

.

w. Dividend payout = Annual dividend / IAC

Dividend payout = 60 / 237 = 0.2532 = 25.32%

.

x. Market-to-book ratio = Market price / Book value

Market-to-book ratio = 15.050 / 5.683 = 2.65 times

.

y. PE ratio = Market price / EPS

PE ratio = 15.050 / 3.95 = 3.81 times