Financial Statement & Ratio Analysis

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Financial Statement

						12/7/16
a. Using the financial statements shown below, calculate net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, and return on invested capital for the most recent year.
Lan & Chen Technologies: Income Statements for Year Ending December 31
(Thousands of Dollars)				2013	2012
Sales				$945,000	$900,000
Expenses excluding depreciation and amortization				812,700	774,000
EBITDA				$132,300	$126,000
Depreciation and amortization				33,100	31,500
EBIT				$99,200	$94,500
Interest Expense				10,470	8,600
EBT				$88,730	$85,900
Taxes (40%)				35,492	34,360
Net income				$53,238	$51,540
Common dividends				$43,300	$41,230
Addition to retained earnings				$9,938	$10,310
Lan & Chen Technologies: December 31 Balance Sheets
(Thousands of Dollars)
Assets				2013	2012
Cash and cash equivalents				$47,250	$45,000
Short-term investments				3,800	3,600
Accounts Receivable				283,500	270,000
Inventories				141,750	135,000
Total current assets				$476,300	$453,600
Net fixed assets				330,750	315,000
Total assets				$807,050	$768,600
Liabilities and equity
Accounts payable				$94,500	$90,000
Accruals				47,250	45,000
Notes payable				26,262	9,000
Total current liabilities				$168,012	$144,000
Long-term debt				94,500	90,000
Total liabilities				$262,512	$234,000
Common stock				444,600	444,600
Retained Earnings				99,938	90,000
Total common equity				$544,538	$534,600
Total liabilities and equity				$807,050	$768,600
Key Input Data
Tax rate				40%
Net operating working capital
2013	NOWC =	Operating current assets	-	Operating current liabilities
2013	NOWC =		-
2013	NOWC =
2012	NOWC =	Operating current assets	-	Operating current liabilities
2012	NOWC =		-
2012	NOWC =
Total net operating capital
2013	TOC =	NOWC	+	Fixed assets
2013	TOC =		+
2013	TOC =
2012	TOC =	NOWC	+	Fixed assets
2012	TOC =		+
2012	TOC =
Investment in total net operating capital
		2013		2012
2013	Inv. In TOC =	TOC	-	TOC
2013	Inv. In TOC =		-
2013	Inv. In TOC =
Net operating profit after taxes
2013	NOPAT =	EBIT	x	( 1 - T )
2013	NOPAT =		x
2013	NOPAT =
Free cash flow
2013	FCF =	NOPAT	-	Net investment in operating capital
2013	FCF =		-
				Michael C. Ehrhardt: Change in total net operating capital (TOC) from the previous year to the current year.	Kenneth D. Jackson: Short-Term Investments are not part of current operating assets		Kenneth D. Jackson: Notes Payable are not part of current operating liabilities	2013	FCF =
Return on invested capital
2013	ROIC =	NOPAT	/	Total net operating capital
2013	ROIC =		/
2013	ROIC =
b. Assume that there were 15 million shares outstanding at the end of the year, the year-end closing stock price was $65 per share, and the after-tax cost of capital was 8%. Calculate EVA and MVA for the most recent year.
Additional Input Data
Stock price per share		$65.00
# of shares (in thousands)		15,000
After-tax cost of capital		8.0%
Market Value Added
MVA =	Stock price	x	# of shares	-	Total common equity
MVA =		x		-
MVA =				-
MVA =
Economic Value Added
EVA =	NOPAT	-	(Operating Capital	x	After-tax cost of capital)
EVA =		-		x
EVA =		-
EVA =

Ratio Analysis

						12/7/16
Requirement: Conduct Ratio Analysis
Joshua & White Technologies: December 31 Balance Sheets
(Thousands of Dollars)
Assets			2013	2012
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			218,400	200,000
Total assets			$379,659	$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			183,793	178,440
Retained Earnings			62,075	40,000
Total common equity			$245,868	$218,440
Total liabilities and equity			$379,659	$327,240
Joshua & White Technologies December 31 Income Statements
(Thousands of Dollars)
			2013	2012
Sales			$420,000	$400,000
COGS except excluding depr. and amort.			300,000	298,000
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 (40%)			26,800	23,016
Net Income Michael C. Ehrhardt: Due to rounding, the numbers calculated in the Chapter 2 problem may differ slightly from these.			$40,200	$34,524
Common dividends			$18,125	$17,262
Addition to retained earnings			$22,075	$17,262
Other Data			2013	2012
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			2013	2012	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 Du Pont analysis for Joshua & White for 2012 and 2013.
	ROE =	PM x	TA Turnover x Equity Multiplier
2013
2012