Build a Model $11/26/2018$

Chapter: $3$

Problem: $15$

Joshua & White Technologies: December $31$ Balance Sheets

$($Thousands of Dollars$)$

Assets $20192018$

Cash and cash equivalents $$21,000$ $$20,000$

Short$-$term investments $3,7593,240$

Accounts Receivable $52,50048,000$

Inventories $84,00056,000$

Total current assets $$161,259$ $$127,240$

Net fixed assets $223,097200,000$

Total assets $$384,356$ $$327,240$

Liabilities and equity

Accounts payable $$33,600$ $$32,000$

Accruals $12,60012,000$

Notes payable $19,9296,480$

Total current liabilities $$66,129$ $$50,480$

Long$-$term debt $67,66258,320$

Total liabilities $$133,791$ $$108,800$

Common stock $178,440178,440$

Retained Earnings $72,12540,000$

Total common equity $$250,565$ $$218,440$

Total liabilities and equity $$384,356$ $$327,240$

Joshua & White Technologies December $31$ Income Statements

$($Thousands of Dollars$)$

$20192018$

Sales $$420,000$ $$400,000$

COGS except excluding depr. and amort. $300,000298,000$

Depreciation and Amortization $19,66018,000$

Other operating expenses $27,60022,000$

EBIT $$72,740$ $$62,000$

Interest Expense $5,7404,460$

EBT $$67,000$ $$57,540$

Taxes $(25\%)16,75014,385$

Net Income $$50,250$ $$34,524$

Common dividends $$18,125$ $$17,262$

Addition to retained earnings $$32,125$ $$17,262$

Other Data $20192018$

Year$-$end Stock Price $$90\mathrm{.}00$ $$96\mathrm{.}00$

# of shares $($Thousands$)4,0524,000$

Lease payment $($Thousands of Dollars$)$ $$20,000$ $$20,000$

Sinking fund payment $($Thousands of Dollars$)$ $$5,000$ $$5,000$

Ratio Analysis $20192018$ Industry Avg

Liquidity Ratios

Current Ratio $2\mathrm{.}442\mathrm{.}522\mathrm{.}58$

Quick Ratio $1\mathrm{.}171\mathrm{.}411\mathrm{.}53$

Asset Management Ratios

Inventory Turnover $($Total COGS$/$Inventories$)3\mathrm{.}815\mathrm{.}647\mathrm{.}69$

Days Sales Outstanding $45\mathrm{.}6243\mathrm{.}4847\mathrm{.}45$

Fixed Assets Turnover $1\mathrm{.}882\mathrm{.}002\mathrm{.}04$

Total Assets Turnover $1\mathrm{.}091\mathrm{.}221\mathrm{.}23$

Debt Management Ratios

Debt Ratio $($Total debt$-$to$-$assets$)22\mathrm{.}8\%18\mathrm{.}8\%20\mathrm{.}0\%$

Liabilities$-$to$-$assets ratio $34\mathrm{.}8\%33\mathrm{.}2\%32\mathrm{.}1\%$

Times$-$interest$-$earned ratio $12\mathrm{.}6713\mathrm{.}9015\mathrm{.}33$

EBITDA coverage ratio $3\mathrm{.}663\mathrm{.}394\mathrm{.}18$

Profitability Ratios

Profit Margin $11\mathrm{.}96\%8\mathrm{.}63\%8\mathrm{.}86\%$

Basic Earning Power $18\mathrm{.}93\%18\mathrm{.}95\%19\mathrm{.}48\%$

Return on Assets $13\mathrm{.}07\%10\mathrm{.}55\%10\mathrm{.}93\%$

Return on Equity $20\mathrm{.}05\%15\mathrm{.}80\%16\mathrm{.}10\%$

Market Value Ratios

Earnings per share $$12\mathrm{.}40$ $$8\mathrm{.}63$ NA

Price$-$to$-$earnings ratio $7\mathrm{.}2611\mathrm{.}1210\mathrm{.}65$

Cash flow per share $$17\mathrm{.}25$ $$13\mathrm{.}13$ NA

Price$-$to$-$cash flow ratio $5\mathrm{.}227\mathrm{.}317\mathrm{.}11$

Book Value per share $$61\mathrm{.}84$ $$54\mathrm{.}61$ NA

Market$-$to$-$book ratio $1\mathrm{.}461\mathrm{.}761\mathrm{.}72$

a$.$ Has Joshua & White's liquidity position improved or worsened? Explain.

The balance sheet shows that the numbers are down from the previous year, however it also shows

that the firm is able to pay off its short term liabilities with its current assists

b$.$ Has Joshua & White's ability to manage its assets improved or worsened? Explain.

Joshua & White's ability to manage assets has worsened. Not only is the $2019$ debt$-$asset ratio

higher

standard but it has also increased from $2018.$ Which means that the company has increased liabilities

putting itself at risk of defaulting in the instance that interest rates were to rise suddenly.

c$.$ How has Joshua & White's profitability changed during the last year?

The profit margins were improved compared to last yesr

d$.$ Perform an extended Du Pont analysis for Joshua & White for each year.

ROE $=$ PM x TA Turnover x Equity Multiplier

$201920\mathrm{.}05\%11\mathrm{.}96\%1\mathrm{.}091\mathrm{.}53$

$201815\mathrm{.}80\%8\mathrm{.}63\%1\mathrm{.}221\mathrm{.}50$

ROE has improved because the profit margin improved compared to the previous year

e$.$ Perform a common size analysis. What has happened to the composition

$($that is$,$ percentage in each category$)$ of assets and liabilities?

Common Size Balance Sheets

Assets $20192018$

Cash and cash equivalents $5\mathrm{.}5\%6\mathrm{.}1\%$

Short$-$term investments $1\mathrm{.}0\%1\mathrm{.}0\%$

Accounts Receivable $13\mathrm{.}7\%14\mathrm{.}7\%$

Inventories $21\mathrm{.}9\%17\mathrm{.}1\%$

Total current assets $41\mathrm{.}9\%39\mathrm{.}0\%$

Net fixed assets $58\mathrm{.}1\%61\mathrm{.}1\%$

Total assets $100\mathrm{.}0\%100\mathrm{.}0\%$

Liabilities and equity $20192018$

Accounts payable

Accruals

Notes payable

Total current liabilities

Long$-$term debt

Total liabilities

Common stock

Retained Earnings

Total common equity

Total liabilities and equity

Common Size Income Statements $20192018$

Sales

COGS except excluding depr. and amort.

Depreciation and Amortization

Other operating