Profitability ratios are one of the most frequently used in the financial ration analysis. We will use profitability ratios to determine Berry‟s Bug Blasters‟ bottom line, efficiency, and performance. This is done through analyzing asset turnovers, profit margin, Return on Assets, and Return on common stockholders‟ equity. Asset Ratio: determined by dividing sales revenue by total assets. In 2008, for every dollar of assets owned by Berry‟s Bug Blasters, they sold $1.68 worth of goods and services.
Reporting Intercorporate Interests (Equity vs Cost Method) 1. On January 1, 2007, Rotor Corporation acquired 30 percent of Stator Company’s Stock for $150,000. On the acquisition date, Stator reported Net assets of $450,000 valued at historical cost and %500,000 stated at fair Value. The difference was due to the increased value of buildings with a remaining life of 15 years. During 2007 and 2008 Stator reported Net Income of $25,000 and $15,000 and paid dividends $10,000 and $12,000, respectively.
The increase in the total liabilities was $ 15,427. This shows that the company increased its borrowing. For example, the accounts payable in the year 2008 were $4,185 while in 2009, they were $9,198. This shows that the hospital purchased more inventories on credit. The biggest portion of current liabilities in the year 2009 is long term debt’s current portion.
o Click on 2008, hold down shift key, and click on 2004, submit query. o Download to excel file and retain values for June of each year (ADM’s month of fiscal year end) plus October 2008. o Compute the annual rate of inflation (June to June), and the rate of inflation from June 2008 to October 2008. o Comment on your findings. The average prices for both corn and soybeans increased from 2004 to 2008, and the change was fairly significant for both. It also seems that the prices are fairly volatile 4. Given what was going on in ADM’s product markets during 2008, does it seem reasonable that the accruals you identified in question (2), changed as much and in the direction they did?
MinuteClinic revenues have grown steadily from 2007-2010. Additional costs of opening a MinuteClinic are as follows: $185,000 Salaries/per location/per year $75,000 Building (start up cost) $40,000 Supplies and Equipment $300,000 per MinuteClinic *100 Locations = $30,000,000 Capital Needed Here are the projected financial assumptions if these clinics are opened: Assumptions Capital needed $30,000,000 Cash used
Using the same math as in part 1 we get an increase of $6,048,000 for a final inventory value of $11,078,000. Again that would be the only change to the balance sheet. 3) There would no net effect on the operating statement in 1960 because the costs that were actually incurred that year were the barrel costs as Costs of Barrels Used. Since production volume and costs haven’t changed since prior to 1957, the costs of the barrels will come out of inventory and be expenses as Cost of Goods Sold for the same amount as would have been expensed as Costs of Barrels Used. #2) I do not see Jones as going from a profit to a loss.
Solution: Total liabilities and equity = Total Assets = $6,783,000 Long term debt = $1,300,000 Current liabilities = $786,000 Total liabilities = $2,086,000 The fraction of the firm’s assets financed using debt = Debt Total Assets = $2,786,000 $6,783,000 = 30.75% If the firm purchase a new warehouse for $1.1 million and finance it entirely with long-term debt, the total liabilities and total assets would increase by the same amount. Hence, the debt ratio would undergo change. Total liabilities = $3,186,000 Total Assets = $7,883,000 Debt ratio = $3,186,000 $7,883,000 = 40.42% Problem 13-9 (Break even analysis) Accounting break even units = Fixed cost + Depreciation Selling price per unit – Variable cost per unit Project A 6270 = 99000 + 26000 SP - 54 6270 SP – 338580 = 125000 6270 SP = 463580 Selling price = 73.94 per unit Project B 730 = 495000 + 101000 990 – VC 722700 – 730 VC = 596000 730 VC = 126700 Variable cost = 173.56 per unit Project C 2000 = 4800 + D 22 - 13 18000 = 4800 + D Depreciation = $13200 Project D 2000 = FC + 17000 22 – 6 32000 = FC + 17000 Fixed cost = $15000 Project | Accounting BEP units | Price per unit | Variable cost per unit | Fixed cost | Depreciation | |
This estimate also is conservative because the cost of new equipment was not included in total assets. Assumed WACC Assumed tax rate 15% 35% Assumed total assets (no change) Assumed current liabilities Capital charge (.15 x $4,000,000) EVA (given) $ 4,000,000 0 600,000 (120,000) Actual 480,000 Required Operating income after tax, $600,000 – 120,000,
Winston has $10 billion in total as- sets. Its balance sheet shows $1 billion in current liabilities, $3 billion in long-term debt, and $6 billion in common equity. It has 800 million shares of common stock outstanding. What is Winston’s market/book ratio? Answer Market value per share =$75 Common equity= 6,000,000 Number of share outstanding =800,000,000 Market to book ration = $75/(6,000,000/800,000,000) 6,000,000/800,000,000=.75 Market to book ration= 75/.75= 100 3-4 Price/Earnings Ratio A company has an EPS of $1.50, a cash flow per share of $3.00, and a price/cash flow ratio of 8.0.
Analysis of Financial Position of Berry’s Bug Abstract The purpose it to analyze financial position of the company for the year ended 2008 as compared to year ended 2007. The techniques of horizontal, vertical and ratio analysis have been used for this purpose. Ratios Analysis The liquidity ratios shows that the company ability to pay off its current liabilities in the year 2008 is better than 2007. As current ratio increased by 2.42 and acid test ratio increased by 2.31 times in 2008 as compared to 2007. However, the account receivable turnover and inventory turnover ratios went down in 2008 as compared to 2007.