1.Calculate at least five 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 be viewed as positive or negative relative to the industry. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How do you interpret this ratio? How does East Coast Yachts compare to the industry average?

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

4. As a practical matter, East Coast Yachts is unlikely to be willing to raise external equity capital, in part because the owners dont want to dilute their existing ownership and control positions. However, East Coast Yachts is planning for a growth rate of 20 percent next year. What are your conclusions and recommendations about the feasibility of East Coasts expansion plans?

EAST COAST YACHTS Balance Sheet as of December 31, 2015 Assets Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment $3.285,600 5,910,800 6,627,300$15,823,700 $101,481,200 Liabilities \& Equity Current liabilities Accounts payable Notes payable Total Long-term debt Shareholders' equity Common stock Retained earnings Total equity $117,304,900 EAST COAST YACHTS 2015 Income Statement Sales Cost of goods sold Other expenses Depreciation Earnings before interest and taxes (EBIT) Interest Taxable income Taxes (40\%) Net income Dividends Add to RE \begin{tabular}{r} $210,900,000 \\ 148,600,000 \\ 25,192,000 \\ 6,879,000 \\ \hline$30,229,000 \\ 3.791,000 \\ \hline$26,438,000 \\ 10,575,200 \\ \hline$15,862,800 \\ \hline \hline \end{tabular} $4,759,301 $11,103,499 $5,580,000 54,004,600$59,584,600 Total liabilities and equity $6,977,700 $4,342,600$21,320,300 $36,400,000 $117,304,900 \begin{tabular}{|c|c|c|c|} \hline \multicolumn{4}{|c|}{ Yacht Industry Ratios } \\ \hline & Lower Quartile & Median & Upper Quartile \\ \hline Current ratio & .50 & 1.43 & 1.89 \\ \hline Quick ratio & .21 & .38 & .62 \\ \hline Total asset turnover & .68 & .85 & 1.38 \\ \hline Inventory turnover & 6.85 & 9.15 & 16.13 \\ \hline Receivables turnover & 6.27 & 11.81 & 21.45 \\ \hline Debt ratio & .44 & .52 & .61 \\ \hline Debt-equity ratio & .79 & 1.08 & 1.56 \\ \hline Equity multiplier & 1.79 & 2.08 & 2.56 \\ \hline Interest coverage & 5.18 & 8.06 & 9.83 \\ \hline Profit margin & 4.05% & 6.98% & 9.87% \\ \hline Return on assets & 6.05% & 10.53% & 15.83% \\ \hline Return on equity & 9.93% & 16.54% & 28.14% \\ \hline \end{tabular}