2. Compare the financial ratios of East Coast Yachts to the industry as a whole by the following categories. a) Short-term solvency or liquidity measures b) Long-term solvency measures c) Asset management or turnover measures d) Profitability measures

Also comment on the performance of each category (a) to (d) above and overall performance of East Coast Yachts based on your analyses.

3) Calculate the sustainable growth rate of East Coast Yachts. Prepare pro forma income statement and balance sheet. Assume that sales, cost of goods sold, other expenses, current assets (cash, accounts receivable, and inventory), fixed assets, and current liabilities (accounts payable and notes payable) grow at precisely this rate. Also assume that depreciation, interest, long-term debt, and common stock remain the same. The firms tax rate is 25%. Compute external fund needed (EFN). (Note that the total equity used to compute the return on equity (ROE) is taken from an ending balance sheet. When you compute the sustainable growth rate, you need to use the following formula: Sustainable growth rate = ROExb 1(ROExb) , where b is the retention or plowback ratio.)

Sales $167,310,000 Cost of goods sold 117,910,000 Other expenses 19,994,000 Depreciation 5,460,000 Earnings before interest and taxes (EBIT) $23,946,000 Interest 3,009,000 Taxable income $20,937,000 Taxes (25%) 5,234,250 Net income $15.702.750 Dividends $9,421,650 Addition to RE $6,281,100 EAST COAST YACHTS Balance Sheet as of December 31, 2019 Assets Liabilities & Equity Current assets Cash Accounts receivable Inventory Total $3,042,000 5,473,000 6,136,000 $14,651,000 Current liabilities Accounts payable Notes payable $6,461,000 13,078,000 Total $19,539,000 Fixed assets Net plant and equipment $93,964,000 Long-term debt $33,735,000 Shareholders' equity Common stock $5,200,000 Retained earnings 50,141,000 Total equity $55,341,000 Total liabilities $108.615.000 and equity Total assets $108.615.000 Yacht Industry Ratios Lower Quartile Median Upper Quartile Current ratio Quick ratio Total asset turnover Inventory turnover Receivables turnover Total debt to total assets ratio Total debt to equity ratio Equity multiplier Interest coverage Profit margin Return on assets Return on equity 0.50 0.21 0.68 4.89 6.27 0.44 0.79 1.79 5.18 4.05% 6.05% 9.93% 1.43 0.38 0.85 6.15 9.82 0.52 1.08 2.08 8.06 6.98% 10.53% 16.54% 1.89 0.62 1.38 10.89 14.11 0.61 1.56 2.56 9.83 9.87% 13.21% 26.15%