BUSN 5200

BUSN 5200

Homework Assignment for Week 4:

For Week 4, please complete the following for Joe’s Fly-By-Night Oil Company, whose financial statements are shown below:

INCOME STATEMENT, 2012BALANCE SHEET, as of Dec 31, 2012

Sales$10,000ASSETS

Cost of goods sold4,000Cash$5,000

Gross profit$6,000Accounts receivable3,000

S, G & A expenses3,000Inventory17,000

EBIT$3,000Current assets$25,000

Interest$200Equipment (gross)27,000

Before-tax earnings$2,800Less Accum Depreciation(12,000)

Taxes1,000Equipment (net)$15,000

Net income$1,800Total assets$40,000

LIABILITIES AND EQUITY

EPS$1.80Accounts payable$17,000

Current liabilities$17,000

Dividends$600Long-term debt$3,000

Addition to retained earnings$1,200Total liabilities$20,000

Common stock (1,000 shares)$7,000

Retained earnings$13,000

Total equity$20,000

Total liabilities & Equity$40,000

Joe's Fly-by-Night Oil

• Prepare a ratio analysis for the fiscal year ended Dec 31, 2012. Organize your analysis per the following outline:

(1) Liquidity

- Current ratio

- Quick ratio

Comments on liquidity

(2) Asset management

- Total Asset turnover

- Average collection period (ACP)

Comments on asset management

(3) Debt management

- Debt ratio

- Times interest earned

Comments on debt management

(4) Profitability

- Net profit margin

- Return on Assets (ROA)

- Return on Equity (ROE)

- Extended Du Pont equation

Comments on profitability to include your comments on the sources of ROE

revealed by the Du Pont equation

(5) Market value ratios

- PE ratio

- Market to book ratio

Comments on the market value ratios

For the purposes of this exercise, assume the following data for Joe’s Fly-By-Night Oil:

Stock price on Dec 31, 2012…$50.00

Number of common shares outstanding on Dec 31, 2012...1,000