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Kramerica Industries (KI) 2019 Income Statement Sales 1563.7    Cost of goods sold 1081.1    Selling...

Kramerica Industries (KI)

2019 Income Statement

Sales

1563.7

   Cost of goods sold

1081.1

   Selling & administrative expenses

231.1

   Depreciation

83.1

Earnings before interest and taxes

?

   Interest expense

5.6

Earnings before taxes

?

   Taxes

44.3

Net income

?

   Dividends

23.7

   Additions to retained earnings

?

Kramerica Industries (KI)

2018 and 2019 Balance Sheets

2018

2019

2018

2019

Cash

16.6

288.5

Accounts payable

325

349.3

Accounts receivable

268.8

306.2

Notes payable

4.2

10.5

Inventory

372.7

423.8

Accrued taxes

16.8

18

Other current assets

29.9

21.3

Long-term debt

343.6

574

Net fixed assets

394.2

399.4

Common stock

50

50

Goodwill and other assets

450

450

Additional paid-in capital

819.6

819.6

Retained earnings

?

?

Total assets

?

?

Total liabilities and equity

?

?

KI's cash flow to stockholders in 2019 is _____.

a.

$31.2

b.

-$11.3

c.

-$29.8

d.

$23.7

KI's cash flow to creditors in 2019 is _____.

a.

$301.9
b.

-$166.7
c.

-$224.8
d.

$239.6

KI's internal growth rate in 2019 is _____.

a.

2.14%
b.

6.34%
c.

1.88%
d.

5.28%

Solutions

Expert Solution

- Preparing the Income Statement & Balance Sheet:-

Particular Amount in $
Sales                         1,563.70
Less: COGS                      (1,081.10)
Less; Selling & Admin Exp.                          (231.10)
Less: Depreciation                            (83.10)
EBIT                            168.40
Interest Expenses                               (5.60)
Earning before tax                            162.80
Taxes                            (44.30)
Net Income                            118.50
Less: Common Stock Dividends                            (23.70)
Contribution to Retained earnings 94.80
ASSETS 2018 2019 LIABILITIES 2018 2019
Current Assets
Cash                     16.60 288.5 Accounts payable                                325.00 349.3
Accounts receivables                  268.80 306.2 Notes Payable                                     4.20 10.5
Inventory                  372.70 423.8 Accured Taxes                                   16.80 18
Other Current Assets                     29.90 21.3 Long-term Debt                                343.60 574
Net Fixed Assets                  394.20 399.4 Common Stocks                                   50.00 50
Goodwill and Other Assets                  450.00 450 Additional paid-in capital                                819.60 819.6
Retained Earnings                                (27.00)                   67.80
TOTAL ASSETS               1,532.20              1,889.20 TOTAL LIABILITIES AND OWNER"S EQUITY                             1,532.20             1,889.20

- Cash flow to stockholders = Dividend Paid - New Common Stock Issued

KI's cash flow to stockholders in 2019 = 23.7 - 0

= $23.7

Hence, Option D

- Cash flow to Creditors = Interest Expenses - New Debt Issued

KI's cash flow to Creditors in 2019 = $5.6 - ($574 - 343.60)

= $5.6 - $230.4

=- $224.8

Hence, Option C

- Internal Growth rate = (ROA*b)/1-(ROA*b)

where, ROA = Return on Assets for 2019 = Net Income/Total Assets

= $118.50/$1889.20

= 6.2725%

b = Retention Ratio for 2019 = Retainted Earnings/Net Income

= $94.80/$118.50

=80%

Internal Growth rate = (0.062725*0.80)/1-(0.062725*0.80)

= 0.05018/1-0.05018 = 0.05018/0.94982

= 5.28%

Hence, option D

If you need any clarification, you can ask in comments.     

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jeff jeffy answered 2 years ago
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