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elham_2222.docFinance 335 – Financial Statement Analysis
The following information was provided by Bubba Bob’s Used Car Enterprises :
INCOME STATEMENT (Partial Information):
Revenue $ 52 000
Cost of Goods Sold $ 9 600
BALANCE SHEET:
Cash $ 79 300
Admin & Supplies 51 000
Total Current Assets 130 300
Fixed Assets 130 000
Total Assets $260 300
Accounts Payable 300
Long Term Liabilities 110 000
Total Liabilities 110 300
Retained Earnings 120 000
Common Stock 30 000
Total Owners’ Equity 150 000
Total Liabilities & Equity $260 300
Use the following information to complete the income statement and answer the following questions:
Expenses:
Wages $16 000
Supplies 5 000
Mortgage Pmts (mnthly) 83
Property Taxes 1 000
Other Debt Pmts (mnthly) 42
Depreciation Expense 2 000
Insurance Expense 400
Interest Expense 7 330
Tax Bracket 40%
Preferred Stock Dividends $3 000
Common Stock Shares Outstanding 15 000
1. What is the firm’s Z-score?
2. What was the company’s GDS (rounded)?
3. What was the company’s TDS (Rounded)?
4. What was the firm’s Sales to Working Capital?
5. What was the firm’s total asset Turnover (sales to total assets)?
6. What is the firm’s Sales to Fixed Assets?
7. What is the firm’s current ratio?
8. What is the Debt Ratio for this firm?
9. What is Net Profit Margin?
10. What is the Gross Profit Margin?
11. What was the firm’s cash flow to debt ratio?
12. What is the ROE?
13. What is the firm’s ROA?
14. Compare Bubba Bob’s ratio to the industry and indicate which are good and which are bad:
Industry Ratios:
Current Ratio: 2.4
Sales/Wk Cap: 6.2
Total Asset Turnover: 2.4
Sales/Fixed Assets: 21.5
Debt Ratio; 43%
ROE: 8.2%
ROA: 6.8%
Based on the Z-score, what should the bank do?
(GDS Cut-off = 30% TDS Cut-off = 40%)
If you as loan officer were asked to lend money to this company, what would you do?
Answers:
434 1.82 42% .40 2.11% 81.5% 4.81%
.1998 3.67% .6454 .5979 .2092 10.6% .1632 40% 3.84% .1998 16.77%
Z-Score: 1.2 + 1.4 + 3.3 + .6 + 1.0
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