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ABC CORPORATION Balance Sheet Year Ended December 31 (in $ millions) Assets 2006 2005 Liabilities &...

ABC CORPORATION

Balance Sheet

Year Ended December 31 (in $ millions)

Assets

2006

2005

Liabilities & Stockowner’s Equity

2006

2005

Current Assets

Current Liabilities

Cash

22.2

19.5

Accounts Payable

39.2

24.5

Accounts Receivables

18.5

13.2

Notes Payable / Short-Term Debt

4.5

3.2

Inventories

27.2

14.3

Current Maturities of Long-Term Debt

13.3

12.3

Other Current Assets

2.0

1.0

Other Current Liabilities

8.0

4.0

Total Current Assets

69.9

48.0

Total Current Liabilities

65.0

45.0

Long Term Assets

Long-Term Liabilities

Land

22.2

20.7

Long-Term Debt

98.9

56.3

Buildings

46.5

30.5

Capital Lease Obligations

---

---

Equipment

39.7

33.2

Total Debt

98.9

56.3

Less Accumulated Depreciation

(18.7)

(17.5)

Deferred Taxes

15.6

7.4

Net Property, Plant, and Equipment

89.7

66.9

Other Long-Term Liabilities

----

----

Goodwill

22.0

---

Total Long Term Liabilities

114.5

63.7

Other Long-Term Assets

41.0

14.0

Total Liabilities

179.5

108.7

Total Long Term Assets

152.7

80.9

Stockholder’s Equity

43.1

20.2

Total Assets

222.6

128.9

Total Liabilities and Stockholder’s Equity

222.6

128.9

ABC Corporation

Income Statement

Year Ended December 31 ($ in millions)

2006

2005

Total Sales

198.8

176.1

Cost of Sales

(153.4)

(147.3)

Gross Profit

35.4

28.8

Selling, General and Administration Expenses

(13.5)

(13.0)

Research and Development

(9.2)

(7.6)

Depreciation and Amortization

(6.2)

(1.1)

Operating Income

16.5

7.1

Other Income

----

----

Earnings Before Interest and Tax (EBIT)

16.5

7.1

Interest Income (or Expense)

(7.7)

(4.6)

Pretax Income

8.8

2.5

Taxes

(0.7)

(0.6)

Net Income

8.1

1.9

Earnings per share

$0.556

$0.528

Diluted Earnings Per Share

$0.526

$0.500

ABC Corporation has 5.8 million shares outstanding and shares are trading for $20

Calculate the following for 2006:

Quick Ratio

Current Ratio

Market to Book Ratio

Debt to Equity Ratio

Enterprise Value

EPS

Operating Margin

Net Profit Margin

Return on Equity

P/E Ratio

Inventory Turnover

Days of Sales Outstanding

ROA

ROE

Did the tax rate increase from 2005 to 2006? If so, by how much?

Solutions

Expert Solution

Ratios for the year 2006:

Current Ratio = Current assets /Current liabilities

Current ratio: 69.9/65 = 1.08

Quick ratio = Current assets - Inventory / Current liabilities

Quick ratio: (69.9 - 27.2) / 65 = .66

Market to Book Ratio = Market price per share / Book value per share

Book value per share = Total equity / Number of shares outstanding

Book value per share: 43.1 / 5.8 = 7.43

Market to Book Ratio: 20 / 7.43 = 2.69

Debt to Equity ratio = Total liabilities/Total equity

Debt to Equity ratio: 179.5 / 43.1 = 4.16

EPS = Net income / Number of shares outstanding

EPS: 8.1 / 5.8 = $1.39

Operating Margin = Operating income / Sales * 100

Operating Margin: 16.5 / 198.8 * 100 = 8.3%

Net Profit Margin = Net profit / Sales * 100

Net profit: 8.1 / 198.8 * 100 = 4.07%

Return on Equity = Net income / Total equity * 100

ROE: 8.1 / 43.1 * 100 = 18.79%

P/E Ratio = Current Price per share / EPS

P/E Ratio : 20 / 1.39 = 14.39

Inventory Turnover = Cost of sale / Average inventory

Average inventory = (Ending inventory + Beginning inventory) / 2

Inventory Turnover = 153.4 / (27.2+14.3)/2

Inventory turnover = 7.39 times

Days of Sales Outstanding = Account receivables / Net credit sales * 365

Days of Sales Outstanding: 18.5 / 198.8 * 365 = 33.97 days

ROA = Net income / Total assets * 100

ROA: 8.1 / 222.6 * 100 = 3.64%

jeff jeffy answered 1 year ago
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