(1) Calculate the metric for Pacioli Wholesale Corporation for 2018. Show your work. (2) Provide a description of what the metric is designed to tell us. What, if anything, does this year's value tell us about Pacioli? (3) Given our understanding of businesses, why is this information important? How does it fit into the overall puzzle? Metric 1: % change in Revenue Metric 2: Gross profit margin Metric 3: ROE Metric 4: Free cash flow Metric 5: Inventory turnover Metric 6: A/R turnover EXHIBIT 22-1 Pacioli Wholesale Corporation Statement of Financial Position As of June 30 2018 and June 30, 2017 2018 2017 2018 2017 ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY Current Assets Cash $ 8,000 12.000 $ 7,000 9,000 $ 3,000 29,000 15,000 $ 47,000 $ 2,000 25,000 12,000 $ 39,000 22,000 49,000 3.000 $ 94,000 30,000 40,000 2.000 $ 88,000 Marketable Securities Accounts Receivable, Net of Uncollectible Accounts Inventory Prepaid Expenses Total Current Assets Fixed Assets Buildings and Equipment Less Accumulated Depreciation Net Buildings and Equipment Land Total Fixed Assets Goodwill $ 45,000 100,000 39,000 $184.000 Current Liabilities Wages Payable Accounts Payable Taxes Payable Total Current Liabilities Long-Term Liabilities Mortgage Payable Bond Payable Deferred Taxes Total Long-Term Liabilities Stockholders' Equity Common Stock, $1 Par, 1000 Shares Common Stock-Excess over Par Preferred Stock, 10%, $100 Par, 100 Shares Retained Earnings Total Stockholders' Equity TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 50,000 100,000 35,000 $185.000 $150,000 $120,000 40,000 30,000 $ 1,000 24,000 $ 1,000 24,000 $110,000 50,000 $160.000 $ 45,000 $ 90,000 50.000 $140,000 $ 50,000 10,000 33.000 $ 68,000 10,000 19.000 $ 54.000 TOTAL ASSETS $299,000 $278,000 $299,000 $278,000 The accompanying notes are an integral part of these statements. EXHIBIT 22-2 Pacioli Wholesale Corporation Income Statement and Analysis of Retained Earnings For the Years Ending June 30, 2018 and June 30, 2017 Sales Less Cost of Goods Sold 2018 $297,000 162,000 $135,000 2017 $246,000 143,000 $103,000 $30,000 12,000 49,000 Gross Profit Operating Expenses Selling Expenses General Expenses Administrative Expenses Total Operating Expenses Operating Income Interest Expense Income Before Taxes Income Taxes $25,000 10,000 40,000 91,000 75,000 $ 44,000 $ 28,000 12,000 10,000 $ 32,000 $ 18,000 13,000 7,000 $ 19,000 $ 11,000 Net Income Earnings Per Share Common $ 18.00 $ 10.00 Less Dividends 2018 and 2017 5,000 3,000 Addition to Retained Earnings $ 14,000 $ 8,000 Retained Earnings July 1, 2017 and 2016 19,000 11,000 Retained Earnings June 30, 2018 and 2017 $ 33,000 $ 19,000 The accompanying notes are an integral part of these statements. EXHIBIT 22-3 Pacioli Wholesale Corporation Statement of Cash Flows For the Years Ending June 30, 2018 and June 30, 2017 2018 2017 $ 19,000 $11,000 10,000 5,000 7,000 8,000 0 8,000 Cash Flows from Operating Activities Net Income Add Expenses Not Requiring Cash: Depreciation Impairment of Goodwill Increase in Taxes Payable and Deferred Taxes Other Adjustments: Add Reduction in Accounts Receivable Add Increase in Wages Payable Add Increase in Accounts Payable Subtract Decrease in Accounts Payable Subtract Increase in Inventory Subtract Increase in Prepaid Expenses Net Cash from Operating Activities Cash Flows from Investing Activities Increase in Marketable Securities Sale of Fixed Assets Purchase of New Equipment Net Cash Used for Investing Activities 8,000 1,000 1,000 0 4,000 0 0 (3,000) (9,000) (2,000) (1,000) 0 $ 44,000 $23,000 $ (3,000) 0 $ 2,000 (30,000) (20,000) $(33,000 ) $(18,000) (1) Calculate the metric for Pacioli Wholesale Corporation for 2018. Show your work. (2) Provide a description of what the metric is designed to tell us. What, if anything, does this year's value tell us about Pacioli? (3) Given our understanding of businesses, why is this information important? How does it fit into the overall puzzle? Metric 1: % change in Revenue Metric 2: Gross profit margin Metric 3: ROE Metric 4: Free cash flow Metric 5: Inventory turnover Metric 6: A/R turnover EXHIBIT 22-1 Pacioli Wholesale Corporation Statement of Financial Position As of June 30 2018 and June 30, 2017 2018 2017 2018 2017 ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY Current Assets Cash $ 8,000 12.000 $ 7,000 9,000 $ 3,000 29,000 15,000 $ 47,000 $ 2,000 25,000 12,000 $ 39,000 22,000 49,000 3.000 $ 94,000 30,000 40,000 2.000 $ 88,000 Marketable Securities Accounts Receivable, Net of Uncollectible Accounts Inventory Prepaid Expenses Total Current Assets Fixed Assets Buildings and Equipment Less Accumulated Depreciation Net Buildings and Equipment Land Total Fixed Assets Goodwill $ 45,000 100,000 39,000 $184.000 Current Liabilities Wages Payable Accounts Payable Taxes Payable Total Current Liabilities Long-Term Liabilities Mortgage Payable Bond Payable Deferred Taxes Total Long-Term Liabilities Stockholders' Equity Common Stock, $1 Par, 1000 Shares Common Stock-Excess over Par Preferred Stock, 10%, $100 Par, 100 Shares Retained Earnings Total Stockholders' Equity TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 50,000 100,000 35,000 $185.000 $150,000 $120,000 40,000 30,000 $ 1,000 24,000 $ 1,000 24,000 $110,000 50,000 $160.000 $ 45,000 $ 90,000 50.000 $140,000 $ 50,000 10,000 33.000 $ 68,000 10,000 19.000 $ 54.000 TOTAL ASSETS $299,000 $278,000 $299,000 $278,000 The accompanying notes are an integral part of these statements. EXHIBIT 22-2 Pacioli Wholesale Corporation Income Statement and Analysis of Retained Earnings For the Years Ending June 30, 2018 and June 30, 2017 Sales Less Cost of Goods Sold 2018 $297,000 162,000 $135,000 2017 $246,000 143,000 $103,000 $30,000 12,000 49,000 Gross Profit Operating Expenses Selling Expenses General Expenses Administrative Expenses Total Operating Expenses Operating Income Interest Expense Income Before Taxes Income Taxes $25,000 10,000 40,000 91,000 75,000 $ 44,000 $ 28,000 12,000 10,000 $ 32,000 $ 18,000 13,000 7,000 $ 19,000 $ 11,000 Net Income Earnings Per Share Common $ 18.00 $ 10.00 Less Dividends 2018 and 2017 5,000 3,000 Addition to Retained Earnings $ 14,000 $ 8,000 Retained Earnings July 1, 2017 and 2016 19,000 11,000 Retained Earnings June 30, 2018 and 2017 $ 33,000 $ 19,000 The accompanying notes are an integral part of these statements. EXHIBIT 22-3 Pacioli Wholesale Corporation Statement of Cash Flows For the Years Ending June 30, 2018 and June 30, 2017 2018 2017 $ 19,000 $11,000 10,000 5,000 7,000 8,000 0 8,000 Cash Flows from Operating Activities Net Income Add Expenses Not Requiring Cash: Depreciation Impairment of Goodwill Increase in Taxes Payable and Deferred Taxes Other Adjustments: Add Reduction in Accounts Receivable Add Increase in Wages Payable Add Increase in Accounts Payable Subtract Decrease in Accounts Payable Subtract Increase in Inventory Subtract Increase in Prepaid Expenses Net Cash from Operating Activities Cash Flows from Investing Activities Increase in Marketable Securities Sale of Fixed Assets Purchase of New Equipment Net Cash Used for Investing Activities 8,000 1,000 1,000 0 4,000 0 0 (3,000) (9,000) (2,000) (1,000) 0 $ 44,000 $23,000 $ (3,000) 0 $ 2,000 (30,000) (20,000) $(33,000 ) $(18,000)