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Build a Model 26-11-2018 Chapter: 3 Problem: 15 Joshua & White Technologies: December 31 Balance Sheets...

Build a Model 26-11-2018
Chapter: 3
Problem: 15

Joshua & White Technologies: December 31 Balance Sheets
(Thousands of Dollars)

Assets 2019 2018
Cash and cash equivalents $21,000 $20,000
Short-term investments 3,759 3,240
Accounts Receivable 52,500 48,000
Inventories 84,000 56,000
Total current assets $1,61,259 $1,27,240
Net fixed assets 2,23,097 2,00,000
Total assets $3,84,356 $3,27,240

Liabilities and equity
Accounts payable $33,600 $32,000
Accruals 12,600 12,000
Notes payable 19,929 6,480
Total current liabilities $66,129 $50,480
Long-term debt 67,662 58,320
Total liabilities $1,33,791 $1,08,800
Common stock 1,78,440 1,78,440
Retained Earnings 72,125 40,000
Total common equity $2,50,565 $2,18,440
Total liabilities and equity $3,84,356 $3,27,240

Joshua & White Technologies December 31 Income Statements
(Thousands of Dollars)
2019 2018
Sales $4,20,000 $4,00,000
COGS except excluding depr. and amort. 3,00,000 2,98,000
Depreciation and Amortization 19,660 18,000
Other operating expenses 27,600 22,000
EBIT $72,740 $62,000
Interest Expense 5,740 4,460
EBT $67,000 $57,540
Taxes (25%) 16,750 14,385
Net Income $50,250 $34,524

Common dividends $18,125 $17,262
Addition to retained earnings $32,125 $17,262

Other Data 2019 2018
Year-end Stock Price $90.00 $96.00
# of shares (Thousands) 4,052 4,000
Lease payment (Thousands of Dollars) $20,000 $20,000
Sinking fund payment (Thousands of Dollars) $5,000 $5,000

Ratio Analysis 2019 2018 Industry Avg
Liquidity Ratios
   Current Ratio 2.58
   Quick Ratio 1.53
Asset Management Ratios
   Inventory Turnover (Total COGS/Inventories) 7.69
   Days Sales Outstanding 47.45
   Fixed Assets Turnover 2.04
   Total Assets Turnover 1.23
Debt Management Ratios
   Debt Ratio (Total debt-to-assets) 20.0%
   Liabilities-to-assets ratio 32.1%
   Times-interest-earned ratio 15.33
   EBITDA coverage ratio 4.18
Profitability Ratios
   Profit Margin 8.86%
   Basic Earning Power 19.48%
   Return on Assets 10.93%
   Return on Equity 16.10%
Market Value Ratios
   Earnings per share NA
   Price-to-earnings ratio 10.65
   Cash flow per share NA
   Price-to-cash flow ratio 7.11
   Book Value per share NA
   Market-to-book ratio 1.72

a. Has Joshua & White's liquidity position improved or worsened? Explain.




b. Has Joshua & White's ability to manage its assets improved or worsened? Explain.





c. How has Joshua & White's profitability changed during the last year?



d. Perform an extended Du Pont analysis for Joshua & White for each year.
ROE =           PM     x TA Turnover    x    Equity Multiplier
2019 20.05% 11.96% 1.09 1.53
2018 15.80% 8.63% 1.22 1.50





e. Perform a common size analysis. What has happened to the composition
     (that is, percentage in each category) of assets and liabilities?

Common Size Balance Sheets
Assets 2019 2018
Cash and cash equivalents
Short-term investments
Accounts Receivable
Inventories
Total current assets
Net fixed assets
Total assets

Liabilities and equity 2019 2018
Accounts payable
Accruals
Notes payable
Total current liabilities
Long-term debt
Total liabilities
Common stock
Retained Earnings
Total common equity
Total liabilities and equity

Common Size Income Statements 2019 2018
Sales
COGS except excluding depr. and amort.
Depreciation and Amortization
Other operating expenses
EBIT
Interest Expense
EBT
Taxes (25%)
Net Income





f. Perform a percent change analysis. What does this tell you about the change in profitability
     and asset utilization?

Percent Change Balance Sheets Base
Assets 2019 2018
Cash and cash equivalents
Short-term investments
Accounts Receivable
Inventories
Total current assets
Net fixed assets
Total assets

Base
Liabilities and equity 2019 2018
Accounts payable
Accruals
Notes payable
Total current liabilities
Long-term debt
Total liabilities
Common stock
Retained Earnings
Total common equity
Total liabilities and equity

Base
Percent Change Income Statements 2019 2018
Sales
COGS except excluding depr. and amort.
Depreciation and Amortization
Other operating expenses
EBIT
Interest Expense
EBT
Taxes (25%)
Net Income





Solutions

Expert Solution

Joshua & White Technologies: December 31 Balance Sheets
(Thousands of Dollars)
Assets 2019 2018
Cash and cash equivalents $21,000 $20,000
Short-term investments 3,759 3,240
Accounts Receivable 52,500 48,000
Inventories 84,000 56,000
Total current assets $161,259 $127,240
Net fixed assets 223,097 200,000
Total assets $384,356 $327,240
Liabilities and equity
Accounts payable $33,600 $32,000
Accruals 12,600 12,000
Notes payable 19,929 6,480
Total current liabilities $66,129 $50,480
Long-term debt 67,662 58,320
Total liabilities $133,791 $108,800
Common stock 178,440 178,440
Retained Earnings 72,125 40,000
Total common equity $250,565 $218,440
Total liabilities and equity $384,356 $327,240
Joshua & White Technologies December 31 Income Statements
(Thousands of Dollars)
2019 2018
Sales $420,000 $400,000
COGS excluding depr. and amort. 300,000 298,000
EBITDA 92,400 80,000
Depreciation and Amortization 19,660 18,000
Other operating expenses 27,600 2,200
EBIT $72,740 $62,000
Interest Expense 5,740 4,460
EBT $67,000 $57,540
Taxes (25%) 16,750 14,385
Net Income $50,250 $34,524
Common dividends $18,125 $17,262
Addition to retained earnings $32,125 $17,262
Other Data 2019 2018
Year-end Stock Price $90 $96
# of shares (Thousands) 4,052 4,000
Lease payment (Thousands of Dollars) $20,000 $20,000
Sinking fund payment (Thousands of Dollars) $5,000 $5,000

RATIO ANALYSIS:

Ratio Analysis 2019 2018 Industry Avg
Liquidity Ratios
   Current Ratio 2.438551921 2.5206 2.58
   Quick Ratio 1.168307399 1.41125 1.53
Asset Management Ratios
   Inventory Turnover 8.571428571 12.4643 7.69
   Days Sales Outstanding 45.625 43.8 47.45
   Fixed Assets Turnover 1.882589188 2 2.04
   Total Assets Turnover 1.092736942 1.22234 1.23
Debt Management Ratios
   Debt Ratio 0.348091353 0.33248 20.0%
Liablities-to-asset ratio 32.1%
   Times-interest-earned ratio 12.67247387 13.9013 15.33
   EBITDA coverage ratio 3.65647365 3.39443 4.18
Profitability Ratios
   Profit Margin 0.119642857 0.08631 8.86%
   Basic Earning Power 0.189251631 0.18946 19.48%
   Return on Assets 0.13073817 0.1055 10.93%
   Return on Equity 0.200546764 0.15805 16.10%
Market Value Ratios
   Earnings per share 12.40128332 8.631 NA
   Price-to-earnings ratio 7.257313433 11.1227 10.65
   Cash flow per share 17.25320829 13.131 NA
   Price-to-cash flow ratio 5.216421113 7.31094 7.11
   Book Value per share 61.83736426 54.61 NA
   Market-to-book ratio 1.455430727 1.75792 1.72

a. Has Joshua & White's liquidity position improved or worsened? Explain.

If we look at the ratios (current and quick) they are slightly below the industry but the ratio's are fell down if you compare to the previous year.  Since the current & Quick ratio indicates the firm's ability to pay off its short term liabilities with the current assets. Here it shows that the company has 2.43 times more CA than CL.


b. Has Joshua & White's ability to manage its assets improved or worsened? Explain.

Asset management turnover are close to the industry average.

Ratio Analysis 2019 2018 Industry Avg
Asset Management Ratios
   Inventory Turnover 9 12.4643 7.69
   Days Sales Outstanding 45.625 43.8 47.45
   Fixed Assets Turnover 1.882589188 2 2.04
   Total Assets Turnover 1.092736942 1.22234 1.23


Inventory Turnover: it is compared by COGS with avg inventory.

Days Sales o/s: This shows how well a company can collect cash from its customers. The sooner it is collected the sooner the same can be utilized by the company without hassle.

Fixed Assets Turnover: this shows the relationship between net sales with avg fixed asset

Total Assets Turnover: this shows the relationship between net sales with avg total asset


c. How has Joshua & White's profitability changed during the last year?

Yes. All the profits margins are improved if the same is compared with the last year.

d. Perform an extended Du Pont analysis for Joshua & White for each year.
ROE =           PM     x TA Turnover    x    Equity Multiplier
2019 20.05% 11.96% 1.09 1.53
2018 15.80% 8.63% 1.22 1.50

ROE has improved because profit margin compared to last year has improved.

jeff jeffy answered 1 year ago
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