1. Calcualte all of the ratios listed in the industry table for East Coast Yachts

2. Compare the performance of East Coast Yachts to the industry as a whole. For each ratio, comment on why it might viewed as positive or negative relative to the industry. How would you interpret this ratio? How does East Coast Yachts comapre to the industry average of this ratio?

3. Calculate the sustaible growth rare for East Coast Yachts. Calculate external funds needed (EFN) and prepare pro forma income statements and balance sheets assuming growth at precisely this rate. Recalcuate the ratios in the previous question. What do you observe?

4. Most assets can be increased as a percentage of sales. For instance, cash can be increased by any amount. However, fixed assets often must be increased in specific amounts since it is impossible, as a practical matter, to buy part of a new plant or machine. In this case, a company has a "staircase" or "lumpy" fixed cost structure. Assume that East Coast Yachts is currently producing 100 percent of capacity and sales are expected to grow 20%. As a result, to expand production, the company must set up an entirely new line at a cost of $95,000,000. Prepare a pro forma income statement and a balance sheet. What is the new EFN with these assumptions? What does this imply about capacity utilization for East Coast Yachts next year?

Managerial Accounting Yacht Industry Ratios MEDIAN UPPER QUARTILE LOWER QUARTILE 1.51 1.97 86 Current ratio 1.01 Quick ratio 43 75 1.27 Total asset turnover 1.10 1.46 12.18 Inventory turnover 14.38 16.43 Receivables turnover 10.25 22.43 17.65 Debt ratio 32 56 61 Debt-equity ratio 83 1.44 1.13 Equity multiplier 1.83 2.44 2.13 Interest coverage 5.72 10.83 8.21 Profit margin 5.02% 7.48% 9.05% Return on assets 7.05% 14.16% 10.67% Return on equity 14.06% 19.32% 26.41% 1. East Coast Yachts uses a small percentage of preferred stock as a source of financing ratios for the company, should nrnfo