After Dans analysis of East Coast Yachtss cash flow (at the end of our previous chapter), Larissa approached Dan about the companys performance and future growth plans. First, Larissa wants to find out how East Coast Yachts is performing relative to its peers. Additionally, she wants to find out the future financing necessary to fund the companys growth. In the past, East Coast Yachts experienced difficulty in financing its growth plan, in large part because of poor planning. In fact, the company had to turn down several large jobs because its facilities were unable to handle the additional demand. Larissa hoped that Dan would be able to estimate the amount of capital the company would have to raise next year so that East Coast Yachts would be better prepared to fund its expansion plans.

To get Dan started with his analyses, Larissa provided the following financial statements. Dan then gathered the industry ratios for the yacht manufacturing industry.

Income Statement:

Balance Sheet:

Industry Ratios:

What Do I Do?

• Calculate at least three ratios listed in the industry table for East Coast Yachts.
• Compare the performance of East Coast Yachts to the industry as a whole. For each ratio chosen, comment on why it might be viewed as positive or negative relative to the industry. How does East Coast Yachts compare to the industry based on the ratio analysis?
• What is the goal of financial statements analysis? Remember, a financial ratio by itself tells us little about a company because financial ratios vary a great deal across industries.