Question

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

Answer 1

Answer a.

Current Ratio = Current Asset /Current Liabilities
Current Ratio = $422 / $180
Current Ratio = 2.34 : 1

Answer b.

Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Quick Ratio = ($422 - $222) / $180
Quick Ratio = $200 / $180
Quick Ratio = 1.11 : 1

Answer c.

Cash Ratio = Cash and Marketable Securities / Current Liabilities
Cash Ratio = $80 / $180
Cash Ratio = 0.44 : 1

Answer d.

Average Inventory = (Beginning Inventory + Ending Inventory) /2
Average Inventory = ($168 + $222) / 2
Average Inventory = $390 /2
Average Inventory = $195

Inventory Ratio = Net Sales / Average Inventory
Inventory Ratio = $600 / $195
Inventory Ratio = 3.08 times

Answer e.

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

Answer f.

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

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