Question

In: Finance

Use the following financial statements for Lake of Egypt Marina, Inc. LAKE OF EGYPT MARINA, INC...

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

LAKE OF EGYPT MARINA, INC
Balance Sheet as of December 31, 2015 and 2014
(in millions of dollars)
2015 2014 2015 2014
  Assets   Liabilities and Equity
  Current assets:   Current liabilities:
     Cash and marketable securities $ 80 $ 42      Accrued wages and taxes $ 40 $ 30
     Accounts receivable 120 66      Accounts payable 90 60
     Inventory 222 168      Notes payable 50 54
        Total $ 422 $ 276         Total $ 180 $ 144
  Fixed assets:   Long term debt: 502 246
     Gross plant and equipment $ 630 $ 360   Stockholders’ equity:
     Less: Depreciation 102 72      Preferred stock (6 million shares) $ 6 $ 6
     Common stock and paid-in
     surplus (54 million shares)
54 54
     Net plant and equipment $ 528 $ 288      Retained earnings 258 150
     Other long-term assets 50 36
        Total $ 578 $ 324         Total $ 318 $ 210
  
  Total assets $ 1,000 $ 600   Total liabilities and equity $ 1,000 $ 600
LAKE OF EGYPT MARINA, INC.
Income Statement for Years Ending December 31, 2015 and 2014
(in millions of dollars)
2015 2014
  Net sales (all credit) $ 600 $ 500
  Less: Cost of goods sold 240 210
  Gross profits $ 360 $ 290
  Less: Other operating expenses 36 29
  Earnings before interest, taxes, depreciation, and
amortization (EBITDA)
324 261
  Less: Depreciation 30 30
  Earnings before interest and taxes (EBIT) $ 294 $ 231
  Less: Interest 54 41
  Earnings before taxes (EBT) $ 240 $ 190
  Less: Taxes 72 57
  Net income $ 168 $ 133
  Less: Preferred stock dividends $ 6 $ 6
  Net income available to common stockholders $ 162 $ 127
  Less: Common stock dividends 54 54
  Addition to retained earnings $ 108 $ 73
  Per (common) share data:
     Earnings per share (EPS) $ 3.000 $ 2.352
     Dividends per share (DPS) $ 1.000 $ 1.000
     Book value per share (BVPS) $ 5.778 $ 3.778
     Market value (price) per share (MVPS) $ 14.800 $ 12.600

Calculate the following ratios for Lake of Egypt Marina, Inc. as of year-end 2015. (Use sales when computing the inventory turnover and use common stockholders' 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 days
h. Fixed asset turnover times
i. Sales to working capital times
j. Total asset turnover 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 times

Solutions

Expert Solution

Answer a.

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $422 / $180
Current Ratio = 2.34 times

Answer b.

Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Quick Ratio = ($422 - $222) / $180
Quick Ratio = 1.11 times

Answer c.

Cash Ratio = Cash and Marketable Securities / Current Liabilities
Cash Ratio = $80 / $180
Cash Ratio = 0.44 times

Answer d.

Average Inventory = ($222 + $168) / 2
Average Inventory = $195

Inventory Turnover = Sales / Average Inventory
Inventory Turnover = $600 / $195
Inventory Turnover = 3.08 times

Answer e.

Days’ Sales in Inventory = 365 / Inventory Turnover
Days’ Sales in Inventory = 365 / 3.08
Days’ Sales in Inventory = 118.51 days

Answer f.

Average Accounts Receivable = (120 + $66) / 2
Average Accounts Receivable = $93

Average Collection Period = 365 * Average Accounts Receivable / Sales
Average Collection Period = 365 * $93 / $600
Average Collection Period = 56.58 days.


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