5. The Super Ski Company manufactures skis and snow boards in Denver, Colorado The firms financial statements for the past two years are presented in the excel spreadsheet (SuperSkiSpreadsheet) posted in Module 5, that includes a forecast for 2020 based on the opportunity to expand next year in 2020, with predicted sales growth of 20% next year. The forecast uses a percentage of sales method that assumes that cost of goods sold, selling expense, depreciation expense, other operating expenses, and other expenses will grow at the same rates as sales of 20%. Interest expense and external financing items are assumed to stay the same for forecasting the external financing needed prior to any financing. For the balance sheet, current assets and current liabilities and gross fixed assets are assumed to grow at the same rate as sales at 20%. External financing needed was solved as Forecast Total Assets Forecast Less Forecast Total Liabilities & Equity

For the forecast, Super Ski Company (SSC) assumes a doubling of dividends paid in 2020 to $40 thousand to please investors. As shown on the spreadsheet, the forecast assets are greater than the forecast liabilities & equity, resulting in $131.78 thousand in external financing needed.

Super Ski has applied to the Colorado Mountain Bank for the loan of $131.78 thousand. As a credit analyst for Colorado Mountain Bank, you have been asked to do a financial analysis for CMB analyzing the trends in financial ratios and the indirect cash flows statements and forecast statements for 2018 to 2019 and 2020.

For this analysis you are asked to answer the following questions

1. Analyze the trends in Liquidity for SSC and peer comparisons by looking at the trends including the forecast and peer comparison where available for:
2. Current Ratio
3. Quick Ratio
4. Days Cash to Cash

Days Accounts Receivable

Days Inventory

Days Accounts Payable

4. Indirect Cash Flow Statement: Cash Flow from Operations
5. CFO/ (Dividends plus previous long-term debt payment)

(you can find this as the last item under profitability ratios on the spreadsheet)

Giving details on these, give your assessment of the firms liquidity trends

for each of these for the past two years, and the forecast year and compared to the Peer average.

Financial Statements (in thousands) 2018 2,400 2,050 350 195 42 0 %Sales 100.00% 85.42% 14.58% % Sales 100.00% 85.00% 2019 2,800 2,380 420 210 51 40 15.00% Sales Growth 2096 Peer Percentage Forecast 2020 100.00% 3360 Assumptions 82.2096 2856 Sales, CGS, and other operating expenses 17.8096 504 grow at 20% rate. 252 Other expenses grow at 20% rate 61.2 assumes 20% growth rate 48 assumes 20% growth rate 12.5096 361.2 237 9.88% 10.75% 2 Super Ski Company 3 4 Income Statements 5 Net Sales 6 Cost Goods Sold 7 Gross Profit 8 Selling Expenses 9 Depreciation Ex. 10 Other Operating Expenses 11 Total Op. Expenses 12 Operating Profit 13 Interest Expense 14 Other Expenses 15 Less Other Income 16 Total Int. & Net Oth Exps. 17 Income before Taxes 18 Income Taxes 19 Net Income 20 Dividends Paid 21 Add. To Ret. Erngs. 22 301 119 4.71% 4.25% 5.3096 142.8 113 38 34 7 14.4 34 12 -11 35 84 Assumes stays the same before external financing Assumes 20% gorwth Assumes stays the same -9 36 -11 37.4 1.25% 1.4096 1.50% 3.21% 3.00% 3.9096 105.4 77 25 29 36.38 Assumes marginal tax rate of 34.5% 52 2.17% 55 1.96% 69.02 40.00 15 37 20 35 Assumes doubling of dividend payments from 2016. 29.02 23 24 2018 2019 90 85 141 167 295 306 22 554 575 %Tot Assets 8.10% 13.43% 29.14% 2.10% 52.76% 54.76% 10.95% 43.81% 3.43% 100.00% 25 26 Balance Sheets (thous.) 27 Cash & Marketable Secs. 28 Acct. Receivables 29 Inventory 30 Prepaid Expenses 31 Total Current Assets 32 Gross Fixed Assets 33 Less Accum. Depr. 34 Net Fixed Assets 35 Long-term Investments 36 Total Assets 37 Liabilities & Equity 38 Notes Payable-Bank 39 Accounts Payable 40 Accrued Expenses 41 Income Tax Payable 42 Current Maturity-LTD 43 Current Liabilities 44 Long-term Debt 45 Total Liabilities 46 Common Stock 115 %TotAssets Peer Average 2020 Forecast 8.18% 5.50% 108 Assumes current assets grow at 20% sales growth rate. 15.18% 18.20% 200.4 20% growth 26.82% 29.30% 354 20% growth 1.64% 21.6 20% growth 51.82% 53.00% 684 58.64% 774 Assumes Gross Fixed Assets grow at 20% sales growth rate 14.55% 221.2 Accum. Depr 2016 + DeprExpense 2017 44.09% 38.20% 552.8 4.09% 54 Assumes growt of 20% 100.00% 100.00% 1290.8 18 570 645 160 485 45 1100 460 36 1050 4.76% 70 70 50 99 15 6.00% 11.20% 106 127.2 32 6.36% 9.64% 2.91% 1.09% 3.64% 38.4 Keep the same to solve for debt needed Assume 20% growth Assume 20% growth Assume 20% growth Keep the same to solve for new debt needed 6 14.4 9.43% 1.43% 0.57% 3.33% 19.52% 26.67% 46.19% 30.95% 12 40 260 35 205 280 485 325 40 290 23.64% 1.70% 3.60% 27.50% 22.80% 57.50% 240 21.82% 240 Keep the same to solve for new debt needed 530 500 325 45.45% 29.55% 325 Assume remains the same 325 Assume remains the same Previous RE + Addition to RE from Income Statement 30.95% 22.86% 53.81% 100.00% 325 275 600 1100 29.55% 25.00% 54.55% 100.00% 304.02 629.02 42.50% 100.00% 1159.02 Total Before Any External Financing 2019 (in thous.) 2020 forecast (in thou) 131.78 External Financing Needed Total Assets less Total Liabs. & Equity 55 51 -26 69.02 61.2 -33.4 11 -59 4 -3.6 7 17 21.2 6.4 2.4 6 125 64.22 76 129 9 9 85 138 -20 -40 46 Common Stock 325 47 Retained Earnings 240 48 Total Equity 565 49 Total Liabs. & Equity 1050 50 51 Indirect Cash Flow Statement 52 Cash Flow from Operations: 53 Net Income 54 Plus Depr. Expense 55 Less Rise in AR 56 Less Chg in Inventory if negative + 57 Less Chg in Prepaid if negative + 58 Plus Rise in Acct. Payable 59 Plus Rise in Accr. Exp. 60 Plus Rise in Income Tax Payable 61 Net Cash from Operations 62 Cash Used for Investments: 63 Chg in GFA & Lease Improvements 64 Chg in Long-term Investments 65 Cash Used for Investments 66 Cash from Financing Activities: 67 Payment of Dividends 68 Change in Bank Notes Payable 69 Change in Current Mat LTD 70 Change in Long-term Debt 71 Cash from Financing Activities 72 Change in Cash CFO less CFI plus CFF 73 Check same as Chg in Cash on Bal Sht. 74 Financial Ratios 75 Liquidity Ratios 2018 76 Current Ratio 2.70 77 Quick Ratio 1.10 78 Cash to Cash Asset Cycle 79 Days Accounts Receivable 21.44 80 Days Inventory 54.48 81 Days Accounts Payable 17.49 82 Days Cash to Cash 58.43 83 CFO 84 85 86 Leverage Ratios 2018 87 Debt to Tangible Net Worth 0.86 x 88 Times Interest Earned 3.03 x 89 Fixed charge coverage 3.03x 90 91 Total Debt to Total Assets 46.19% 92 Profitability Ratios 20 31.78 5 -40 -35 Assume 31.78 thous financed short-term To be determined Assume 100 thous. Financed long-term 100 91.78 18.00 5 2019 2.19 Peers 2.10 1.01 2020 Forecast 2.36 1.14 0.99 21.77 45.24 16.33 50.68 $125th. 28.00 48.20 26.10 50.10 21.77 45.24 16.26 50.75 $64.22 th. Forecast 2020 1.05 2019 0.83 x 3.47 x 3.32x Peers 1.4 x 3.1 x 2.4 x To be determined To be determined 45.46% 51.2796 2018 0.86 x 3.03 x 3.03x 2019 0.83 x 3.47 x 3.32x Peers 1.4 x 3.1 x 2.4 x 2020 Forecast 1.05 To be determined To be determined 46.19% 45.46% 51.279 19.8096 85 86 Leverage Ratios 87 Debt to Tangible Net Worth 88 Times Interest Earned 89 Fixed charge coverage 90 91 Total Debt to Total Assets 92 Profitability Ratios 93 ROE 94 Profit before Taxes to Equity 95 ROA 96 Profit before Taxes to Assets 97 Asset Utilization 98 Net Profit Margin 99 Equity Multiplier 100 CGS to Sales 101 Op. Expense to Sales 102 Sales to Net Fixed Assets 103 Cash Flow Ratios 104 CFO/ (Div + last CMLTD) 105 using previous year 106 current maturing long-termdebt 107 as shown on balance sheet 108 109 110 111 8.30% 2.4 x 9.2096 13.6396 4.9596 7.3396 2.29x 2.179 1.86 x 85.4296 9.8896 5.22 x 9.1796 14.0096 5.0096 7.6495 2.55 x 1.9696 1.83 x 8596 10.7596 5.77 x 10.9796 16.7696 5.3596 8.17% 2.60 2.0595 2.05 85.0096 10.7596 6.08 With $40 div. With $20 div. 0.803 1.07 2.4 x 82.20% 12.5096 2.27 x Financial Statements (in thousands) 2018 2,400 2,050 350 195 42 0 %Sales 100.00% 85.42% 14.58% % Sales 100.00% 85.00% 2019 2,800 2,380 420 210 51 40 15.00% Sales Growth 2096 Peer Percentage Forecast 2020 100.00% 3360 Assumptions 82.2096 2856 Sales, CGS, and other operating expenses 17.8096 504 grow at 20% rate. 252 Other expenses grow at 20% rate 61.2 assumes 20% growth rate 48 assumes 20% growth rate 12.5096 361.2 237 9.88% 10.75% 2 Super Ski Company 3 4 Income Statements 5 Net Sales 6 Cost Goods Sold 7 Gross Profit 8 Selling Expenses 9 Depreciation Ex. 10 Other Operating Expenses 11 Total Op. Expenses 12 Operating Profit 13 Interest Expense 14 Other Expenses 15 Less Other Income 16 Total Int. & Net Oth Exps. 17 Income before Taxes 18 Income Taxes 19 Net Income 20 Dividends Paid 21 Add. To Ret. Erngs. 22 301 119 4.71% 4.25% 5.3096 142.8 113 38 34 7 14.4 34 12 -11 35 84 Assumes stays the same before external financing Assumes 20% gorwth Assumes stays the same -9 36 -11 37.4 1.25% 1.4096 1.50% 3.21% 3.00% 3.9096 105.4 77 25 29 36.38 Assumes marginal tax rate of 34.5% 52 2.17% 55 1.96% 69.02 40.00 15 37 20 35 Assumes doubling of dividend payments from 2016. 29.02 23 24 2018 2019 90 85 141 167 295 306 22 554 575 %Tot Assets 8.10% 13.43% 29.14% 2.10% 52.76% 54.76% 10.95% 43.81% 3.43% 100.00% 25 26 Balance Sheets (thous.) 27 Cash & Marketable Secs. 28 Acct. Receivables 29 Inventory 30 Prepaid Expenses 31 Total Current Assets 32 Gross Fixed Assets 33 Less Accum. Depr. 34 Net Fixed Assets 35 Long-term Investments 36 Total Assets 37 Liabilities & Equity 38 Notes Payable-Bank 39 Accounts Payable 40 Accrued Expenses 41 Income Tax Payable 42 Current Maturity-LTD 43 Current Liabilities 44 Long-term Debt 45 Total Liabilities 46 Common Stock 115 %TotAssets Peer Average 2020 Forecast 8.18% 5.50% 108 Assumes current assets grow at 20% sales growth rate. 15.18% 18.20% 200.4 20% growth 26.82% 29.30% 354 20% growth 1.64% 21.6 20% growth 51.82% 53.00% 684 58.64% 774 Assumes Gross Fixed Assets grow at 20% sales growth rate 14.55% 221.2 Accum. Depr 2016 + DeprExpense 2017 44.09% 38.20% 552.8 4.09% 54 Assumes growt of 20% 100.00% 100.00% 1290.8 18 570 645 160 485 45 1100 460 36 1050 4.76% 70 70 50 99 15 6.00% 11.20% 106 127.2 32 6.36% 9.64% 2.91% 1.09% 3.64% 38.4 Keep the same to solve for debt needed Assume 20% growth Assume 20% growth Assume 20% growth Keep the same to solve for new debt needed 6 14.4 9.43% 1.43% 0.57% 3.33% 19.52% 26.67% 46.19% 30.95% 12 40 260 35 205 280 485 325 40 290 23.64% 1.70% 3.60% 27.50% 22.80% 57.50% 240 21.82% 240 Keep the same to solve for new debt needed 530 500 325 45.45% 29.55% 325 Assume remains the same 325 Assume remains the same Previous RE + Addition to RE from Income Statement 30.95% 22.86% 53.81% 100.00% 325 275 600 1100 29.55% 25.00% 54.55% 100.00% 304.02 629.02 42.50% 100.00% 1159.02 Total Before Any External Financing 2019 (in thous.) 2020 forecast (in thou) 131.78 External Financing Needed Total Assets less Total Liabs. & Equity 55 51 -26 69.02 61.2 -33.4 11 -59 4 -3.6 7 17 21.2 6.4 2.4 6 125 64.22 76 129 9 9 85 138 -20 -40 46 Common Stock 325 47 Retained Earnings 240 48 Total Equity 565 49 Total Liabs. & Equity 1050 50 51 Indirect Cash Flow Statement 52 Cash Flow from Operations: 53 Net Income 54 Plus Depr. Expense 55 Less Rise in AR 56 Less Chg in Inventory if negative + 57 Less Chg in Prepaid if negative + 58 Plus Rise in Acct. Payable 59 Plus Rise in Accr. Exp. 60 Plus Rise in Income Tax Payable 61 Net Cash from Operations 62 Cash Used for Investments: 63 Chg in GFA & Lease Improvements 64 Chg in Long-term Investments 65 Cash Used for Investments 66 Cash from Financing Activities: 67 Payment of Dividends 68 Change in Bank Notes Payable 69 Change in Current Mat LTD 70 Change in Long-term Debt 71 Cash from Financing Activities 72 Change in Cash CFO less CFI plus CFF 73 Check same as Chg in Cash on Bal Sht. 74 Financial Ratios 75 Liquidity Ratios 2018 76 Current Ratio 2.70 77 Quick Ratio 1.10 78 Cash to Cash Asset Cycle 79 Days Accounts Receivable 21.44 80 Days Inventory 54.48 81 Days Accounts Payable 17.49 82 Days Cash to Cash 58.43 83 CFO 84 85 86 Leverage Ratios 2018 87 Debt to Tangible Net Worth 0.86 x 88 Times Interest Earned 3.03 x 89 Fixed charge coverage 3.03x 90 91 Total Debt to Total Assets 46.19% 92 Profitability Ratios 20 31.78 5 -40 -35 Assume 31.78 thous financed short-term To be determined Assume 100 thous. Financed long-term 100 91.78 18.00 5 2019 2.19 Peers 2.10 1.01 2020 Forecast 2.36 1.14 0.99 21.77 45.24 16.33 50.68 $125th. 28.00 48.20 26.10 50.10 21.77 45.24 16.26 50.75 $64.22 th. Forecast 2020 1.05 2019 0.83 x 3.47 x 3.32x Peers 1.4 x 3.1 x 2.4 x To be determined To be determined 45.46% 51.2796 2018 0.86 x 3.03 x 3.03x 2019 0.83 x 3.47 x 3.32x Peers 1.4 x 3.1 x 2.4 x 2020 Forecast 1.05 To be determined To be determined 46.19% 45.46% 51.279 19.8096 85 86 Leverage Ratios 87 Debt to Tangible Net Worth 88 Times Interest Earned 89 Fixed charge coverage 90 91 Total Debt to Total Assets 92 Profitability Ratios 93 ROE 94 Profit before Taxes to Equity 95 ROA 96 Profit before Taxes to Assets 97 Asset Utilization 98 Net Profit Margin 99 Equity Multiplier 100 CGS to Sales 101 Op. Expense to Sales 102 Sales to Net Fixed Assets 103 Cash Flow Ratios 104 CFO/ (Div + last CMLTD) 105 using previous year 106 current maturing long-termdebt 107 as shown on balance sheet 108 109 110 111 8.30% 2.4 x 9.2096 13.6396 4.9596 7.3396 2.29x 2.179 1.86 x 85.4296 9.8896 5.22 x 9.1796 14.0096 5.0096 7.6495 2.55 x 1.9696 1.83 x 8596 10.7596 5.77 x 10.9796 16.7696 5.3596 8.17% 2.60 2.0595 2.05 85.0096 10.7596 6.08 With $40 div. With $20 div. 0.803 1.07 2.4 x 82.20% 12.5096 2.27 x