Question

Based on the following information for XYZ Corporation, answer the each question (calculate for year 2018). Assume that price per share is $15.25 and number of shares is 350.

	2017	2018
Income Statement
Sales		3,850
Cost of goods sold		2,150
Expenses		200
Depreciation		875
EBIT
Interest		250
Taxable Income
Taxes		?
Net Income
Dividends		225
Balance Sheet
Current assets	2,000	2,350
Net fixed assets	6,700	7,000
Total Assets (TA)	?	?
Current liabilities	950	1,200
Long-term debt	2,800	3,100
Total Liabilities (TD)	?	?
Common stock	3,000	3,077.5
Retained Earnings	1,950	1,972.5
Total Equity (TE)	?	?

1. What are the XYZ’s tax liabilities? Use a 34 percent tax rate throughout.
2. Calculate cash flow from assets, cash flow to creditors, and cash flow to stockholders. Check the CFFA identity.
3. (1) Calculate XYZ’s financial ratios for the following items and (2) briefly explain what the ratio is measuring. Then, (3) compare the ratios for XYZ to the industry average ratios. Indicate whether or not XYZ is in a better financial position.

1. Profit Margin (industry average = 0.09)
2. ROA (industry average = 0.04)
3. Current Ratio (industry average = 1.25)
4. Quick Ratio (assume inventory = $1,200) (industry average = 1.15)
5. Debt-to-Equity (industry average = 0.85)
6. Total Debt Ratio (industry average = 1.55)
7. Inventory Turnover (assume inventory = $1,200) (industry average = 9.8)
8. Total Asset Turnover (industry average = 0.62)
9. Times Interest Earned (industry average = 3.25)
10. Du Pont Identity
11. EPS
12. Price/Earning (P/E) Ratio (industry average = 5.50)
13. Market-to-Book Ratio (industry average = 2.25)

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Answer 1