The T & P Manufacturing Company was very satisfied with their xxx1 performance. The company had only begun operations the prior year, and as a result, sales had been slow. However, things had picked up considerably in xxx1 with sales more than doubling in volume. T & P had changed none of its business practices during the year and had managed to hold its cost of goods sold to 78% of sales. All sales were made on credit, and payment was required within 30 days of the sale. The company paid for its purchases in 30 days and maintained a cash balance of 20% in sales. The only thing that had changed during the year was the company?s inventory turnover, which had jumped from 3 to 6. While T & P?s management was enthusiastic about the company?s increased level of sales, it was concerned about the possible necessity of increasing its short-term debt. In order to assess the situation, the company was in the process of completing the financial statements shown below. (Inv. Turn = C.O.G.S/Inv.). Also, use 360-day/year for ratios computation.

Complete the forms given. For xxx1, use short-term Notes Payable as the balancing account (a ?plug?).

1. Compare ROE, ROA, EM, PM, A/R turnover, inventory turnover, fixed asset turnover for the years xxxo and xxx1.

2. What is your assessment of T & P Manufacturing Company based on the figures obtained in questions 1 and 2? Will the company need to raise external funds (EFN or AFN ) in xxx1, and how much?

3. Complete the statements for xxx1 assuming that cost of goods sold is 83%, that the company maintains cash balance of 15% of sales, everything else remains as stated in the problem. And redo questions 1, 2 and 3.

Income Statement: Sales Cost of goods sold Gross margin Other expenses Profit before tax Taxes @ 40% Profit after tax XXXO 1,875,000 1,462,500 412,500 300,000 112,500 45,000 67,500 xxxl 3,825,000 300,000 Balance sheet: Cash Accounts receivable Inventory Total current assets Net property, plant and equipment Total assets 375,000 154,110 487,500 1,016,610 600,000 1,616,610 570,000 Accounts payable Short-term Notes Payable Total current liabilities Long-term debt Common stock Retained earnings Total long-term debt and equity Total liabilities and equity Net working capital: Current assets Current liabilities Net working capital 120,203 228,907 349,110 450,000 750,000 67,500 1,267,500 1,616,610 450,000 750,000