Question

In: Finance

Use the financial statements of Heifer Sports Inc. to find the information below for Heifer. (Use...

Use the financial statements of Heifer Sports Inc. to find the information below for Heifer. (Use 365 days a year. Round all answers to 2 decimal places except $ amounts.)

Income Statement

2017

Sales

$

5,670,000

Cost of goods sold

2,967,000

Depreciation

293,200

Selling & admin. expenses

1,570,000

EBIT

$

839,800

Interest expense

151,000

Taxable income

$

688,800

Taxes

310,500

Net income

$

378,300

Balance Sheet, Year-End

2017

2016

Assets

Cash

$

46,200

$

67,000

Accounts receivable

632,000

1,159,200

Inventory

469,200

806,300

Total current assets

$

1,147,400

$

2,032,500

Fixed assets

2,993,000

4,737,000

Total assets

$

4,140,400

$

6,769,500

Liabilities and Stockholders' Equity

Accounts payable

$

329,500

$

796,000

Short-term debt

498,000

975,300

Total current liabilities

$

827,500

$

1,771,300

Long-term bonds

2,097,800

3,901,400

Total liabilities

$

2,925,300

$

5,672,700

Common stock

$

315,200

$

315,200

Retained earnings

899,900

781,600

Total stockholders' equity

$

1,215,100

$

1,096,800

Total liabilities and stockholders' equity

$

4,140,400

$

6,769,500

c.

Cash flow from operating activities in 2017

g.

Operating profit margin

h.

Return on equity

j.

Compound leverage ratio

k.

Net cash provided by operating activities

Solutions

Expert Solution

Answer of Part c:

Cash Flow from Operating Activities = EBIT + Depreciation – Taxes
Cash flow from Operating Activities = $839,800 + $293,200 - $310,500
Cash flow from Operating Activities 2017 = $822,500

Answer of Part g:

Operating Profit Margin = EBIT / Sales
Operating Profit Margin = $839,800 / $5,670,000
Operating Profit Margin = 14.81%

Answer of Part h:

Average Stockholders Equity = (Beginning Stockholders Equity + Ending stockholders Equity) / 2
Average Stockholders Equity = ($1,096,800 + $1,215,100) / 2
Average Stockholders Equity = $2,311,900 / 2
Average Stockholders Equity = $1,155,950

Return on Equity = Net Income / Average Stockholder’s Equity
Return on Equity = $378,300 / $1,155,950
Return on Equity = 32.73%

Answer of Part j:

Interest Burden = Pretax Profit / EBIT
Interest Burden = $688,800 / $839,800
Interest Burden = 0.82

Leverage = Assets / Equity
Leverage = $4,140,400 / $1,215,100
Leverage = 3.41

Compound Leverage Ratio = Interest Burden * Leverage
Compound Leverage Ratio = 0.82 * 3.41
Compound Leverage Ratio = 2.80


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