FINANCE HOMEWORK HELP.
Prof.Bella ambrose
assignment_7.docxUsing the Stetson Skydiving Adventures financial statements that are below, complete the following tasks using excel worksheets where needed:
a. Set up a ratio worksheet and calculate all of the ratios for Stetson Skydiving Adventures.
b. Identify at least two areas of potential concern using the ratio. Identify at least two areas that have shown improvement.
c. In 2011 Stetson Skydiving Adventure’s ROE increased. Explain, in words, why this increase occurred using the Du Pont method as shown in the following equation:
ROE = Net Profit Margin X Total Asset Turnover
1-Total Debt Ratio
d. Stetson Skydiving Adventures has shown an accounting profit in each of the past two years. Calculate their economic profits for these years and compare it to net income. Assume that the weighted average cost of capital is 11%.
e. Using Altman’s model for privately held firms, calculate the Z-score for Stetson Skydiving Adventures. Does it appear that the firm is in imminent danger of bankruptcy?
Stetson Skydiving Adventures
Income Statements
For the years 2010 and 2011
2011 2010
Sales $3,500,000 $3,230,000
Cost of Goods $2,273,300 $2,162,500
Gross Profit 1,226,700 1,067,500
Depreciation 84,000 71,000
Selling & Admin. Expense 869,800 835,000
Lease Expense 65,000 65,000
Net Operating Income 207,900 96,500
Interest Expense 112,000 68,000
Earnings Before Taxes 95,900 28,500
Taxes 33,565 9,975
Net Income $62,335 $18,525
Notes:
Tax Rate 35.00% 35.00%
Shares 50,000 40,000
Earnings per Share $1.25 $0.46
Balance Sheet
For the Year Ended December 31, 2011
2011 2010
Assets
Cash $52,000 $41,000
Marketable Securities 2,435 $21,000
Accounts Receivable 420,000 372,000
Inventory 515,000 420,000
Total Current Assets 989,435 854,000
Gross Fixed Assets 2,680,000 2,170,000
Accumulated Depreciation 569,000 485,000
Net Plant and Equipment 2,111,000 1,685,000
Total Assets $3,100,435 $2,539,000
Liabilities & Owners Equity
Accounts Payable $505,000 $290,000
Accrued Expenses 35,000 30,000
Total Current Liabilities $540,000 $320,000
Long-term Debt 1,171,000 1,061,000
Total Liabilities 1,711,100 1,381,000
Common Stock ($2 par) 100,000 80,000
Additional Paid-in-Capital 691,000 542,000
Retained Earnings 598,335 536,000
Total Owners Equity 1,389,335 1,158,000
Total Liab. & Owner’s Equity $3,100,435 $2,539,000
