Business Finance

a2_-_answers.xlsx

Income Statement

Smith-John Widgets, Inc.
Income Statement
	2009	2010	2011		Given Info
Sales………………………………………………………………………….	$ 3,702,480	$ 3,961,654	$ 3,981,462	$ 3,702,480
Cost of goods sold…………………………………….	2,665,786	2,879,049	2,936,630	2,665,786
Gross profits……………………………………………..	1,036,694	1,082,605	1,044,832	1,036,694
Selling and administrative expense………….	765,800	773,458	788,927	765,800
Depreciation expense………………………………	31,265	32,470	33,675	31,265
Operation Profit……………………………………….	239,629	276,677	222,230	239,629
Interest expense……………………………………...	12,532	10,325	10,235	12,532
Earnings before taxes………………………………	227,097	266,352	211,995	227,097
Taxes……………………………………………………….	79,484	93,223	74,198	79,484
Earnings after taxes………………………………..	147,613	173,129	137,797	147,613
Preferred stock dividends……………………….	- 0	- 0	- 0	- 0
Earnings available to common stockholders	147,613	173,129	137,797	147,613
Common shares outstanding…………………..	80,000	80,000	80,000	50,000
Earnings per share………………………………….	1.8	2.2	1.7	3.0

Smith-John Widgets, Inc.
Camparative Balance Sheet
	Year-End 2009	Year-End 2010	Year-End 2011
Assets
Current assets:
Cash	$ 35,750	$ 62,635	$ 86,595
Marketable Securities	12,545	23,564	24,153
Accounts receivable (net)	246,580	293,430	349,182
Inventory	185,652	243,117	312,622
Prepaid expenses	6,575	21,525	26,325
Total current assets	487,102	644,271	798,877
Plant and equipment	984,021	1,026,880	1,151,210
Less: Accumulated depreciation	176,580	209,050	242,725
Net plant and equipment	807,441	817,830	908,485
Total assets	1,294,543	1,462,101	1,707,362
Liabilities and Stockholder's Equity
Current Liabilities:
Accounts payable	62,685	116,696	188,569
Other Liabilities	123,256	150,674	195,265
Total current liabilities	185,941	267,370	383,834
Long-term liabilities:
Bonds payable	421,000	334,000	325,000
Total liabilities	606,941	601,370	708,834
Stockholders' equity:
Common stock, $1 par value	75,000	75,000	75,000
Capital paid in excess of par	275,000	275,000	275,000
Retained earnings	337,602	510,731	648,528
Total stockholders' equity	687,602	860,731	998,528
Total liabilities and stockholders' equity	1,294,543	1,462,101	1,707,362
	- 0	- 0	- 0

Ratio Analysis
Smith-John Widgets Inc.					Conclusion			Industry Average
		2009	2010	2011	2009	2010	2011
A.	Profitability
1	Profit Margin	4.0%	4.4%	3.5%				3.2%
2	Return on assets	11.4%	11.8%	8.1%				6.0%	Calculations for Return on Common Equity
3	Return on Common Equity	21.5%	20.1%	13.8%				15.6%	0.415	0.411	0.469	0.585	0.589	0.531
B.	Asset Utilization
4	Receivables turnover	15.0	13.5	11.4				8.5 x
5	Inventory Turnover	19.9	16.3	12.7				12.0 x
6	Fixed asset Turnover	4.59	4.84	4.38				5.75 x
7	Total Asset Turnover	2.86	2.71	2.33				1.89 x
C.	Liquidity
8	Current ratio	2.62	2.41	2.08				3.10
	Calculations For Quick Ratio	301450	401154	486255
9	Quick Ratio	1.62	1.50	1.27				1.40
D.	Debt Utilization
10	Debt Total Assets	47%	41%	42%				37%

200920102011

Accumulated depreciation176,580 209,050 242,725

Retained earnings337,602 510,731 648,528

Sales3,702,480 3,961,654 3,981,462

Cash35,750 62,635 86,595

Bonds payable421,000 334,000 325,000

Accounts receivable246,580 293,430 349,182

Depreciation expense31,265 32,470 33,675

Common stock shares outstanding80,000 80,000 80,000

Plant and equipment, at cost984,021 1,026,880 1,151,210

Taxes79,484 93,223 74,198

Accounts payable62,685 116,696 188,569

Common stock, $1 par75,000 75,000 75,000

Inventory185,652 243,117 312,622

Prepaid expenses6,575 21,525 26,325

Cost of goods sold2,665,786 2,879,049 2,936,630

Interest expense12,532 10,325 10,235

Selling and administrative expenses765,800 773,458 788,927

Marketable securities12,545 23,564 24,153

Other current liabilities123,256 150,674 195,265

Capital paid in excess of par (common)275,000 275,000 275,000