4. Case analysis

Here are the financial statements of East Coast Yachts Corporation. Please calculate the financial ratios and make the financial planning of the firm.

East Coast Yachts Corporation

Income Statement2006 ($)

Sales Cost of goods sold Other expenses Depreciation Earnings before interest and taxes (EBIT) Interest expense Pretax income Taxes40% Net income Dividend Retained Earnings

128 700 000 90 700 000 15 380 000 4 200 000 18 420 000 2 315 000 16 105 000 6 442 000 9 663 000 5 797 800 3 865 200

East Coast Yachts Corporation

Balance Sheet2006 ($)

Asset Liability and Stockholders Equity

Current Assets: Current Liability:

Cash 2 340 000 Accounts Payable 4 970 000

Accounts Receivable 4 210 000 Notes Payable 10 060 000

Inventory 4 720 000

Total Current Assets Fixed Assets: Plant and Equipment Total Assets

11 270 000 72 280 000 83 550 000

Total Current Liabilities Long-term Liabilities Stockholders Equity Common Stock Retained Earnings Total Equity Total Liabilities and Stockholders Equity

15 030 000 25 950 000 4 000 000 38 570 000 42 570 000 83 550 000

Requirements:

1. Calculate the financial ratios of East Coast Yachts Corporation. (10)
2. Calculate the sustained growth of East Coast Yachts Corporation. If the firm wants to realize this growth rate, what is the External Financing Needed (EFN)? (10)
3. If the firm wants to realize the growth rate of 20%, but the firm does not want to attain the

EFN by issuing the stock, what do you suggest to the firm as for the expansion plan? (10)