Bob Builder Construction Company (BBCC ) is a large firm for kitchen appliance manufacturers. Peral, the finance manager of BBCC. submitted a justification to support the application for a short-term loan from the Queensville Interstate Bank (QIB) to finance increased sales. The consolidated income statement and balance sheet of BBCC are as follows. You are the loan officer at QIB responsible for determining whether BBCC's business is strong enough to be able to repay the loan. Using the attached Income Statement and Balance Sheet, accomplish the following: 1. Calculate the following profitability ratios for 2015 and 2016, compare with the industry averages shown in parentheses, and indicate if the company is doing better or worse than the industry and whether the performance is improving or deteriorating in 2016 as compared to 2015. Calculate the EVA and MVA for BBCC, assuming that the firm's income tax rate is 40 percent, the weighted average rate of retum expected by the suppliers of the firm's capital is 10 percent, and the market price of the firm's stock is $20. There are 1.2million shares outstanding. a. Gross profit margin ( 50 percent) b. Operating profit margin (15 percent) c. Net profit margin ( 8 percent) d. Retum on assets ( 10 percent) a. Retum on equity ( 20 percent) t. Current ratio (1.5) g. Quick ratio (1.0) h. Debt to total asset ratio (0.5) t Times interest eamed (25) 1. Average collection period (45 days) k Inventory tumover (8) 1. Total asset tumover (1.6) 2. Determine the sources and uses of funds and prepare a statement of cash flows for 2016 . 3. Discuss the financial strengths and weaknesses of BBCC based on the financial condition as evident from the ratio analysis and the cash flow statement. 4. Which ratios should you analyze more critically before recommending granting of the loan and what is your recommendation? You may work on the project in groups or pairs if you wish. Each group should be no more than 4 students. You may select any of your classmates to work on the project together, however, you must still submit your own individual version and mention the contributions of others to the project in your group. Each project should be submitted as an Excel sheet attachment. Bob Builder Construction Company (BBCC ) is a large firm for kitchen appliance manufacturers. Peral, the finance manager of BBCC. submitted a justification to support the application for a short-term loan from the Queensville Interstate Bank (QIB) to finance increased sales. The consolidated income statement and balance sheet of BBCC are as follows. You are the loan officer at QIB responsible for determining whether BBCC's business is strong enough to be able to repay the loan. Using the attached Income Statement and Balance Sheet, accomplish the following: 1. Calculate the following profitability ratios for 2015 and 2016, compare with the industry averages shown in parentheses, and indicate if the company is doing better or worse than the industry and whether the performance is improving or deteriorating in 2016 as compared to 2015. Calculate the EVA and MVA for BBCC, assuming that the firm's income tax rate is 40 percent, the weighted average rate of retum expected by the suppliers of the firm's capital is 10 percent, and the market price of the firm's stock is $20. There are 1.2million shares outstanding. a. Gross profit margin ( 50 percent) b. Operating profit margin (15 percent) c. Net profit margin ( 8 percent) d. Retum on assets ( 10 percent) a. Retum on equity ( 20 percent) t. Current ratio (1.5) g. Quick ratio (1.0) h. Debt to total asset ratio (0.5) t Times interest eamed (25) 1. Average collection period (45 days) k Inventory tumover (8) 1. Total asset tumover (1.6) 2. Determine the sources and uses of funds and prepare a statement of cash flows for 2016 . 3. Discuss the financial strengths and weaknesses of BBCC based on the financial condition as evident from the ratio analysis and the cash flow statement. 4. Which ratios should you analyze more critically before recommending granting of the loan and what is your recommendation? You may work on the project in groups or pairs if you wish. Each group should be no more than 4 students. You may select any of your classmates to work on the project together, however, you must still submit your own individual version and mention the contributions of others to the project in your group. Each project should be submitted as an Excel sheet attachment
