Build a Model $3/13/2023$

Chapter: $3$

Problem: $15$

Joshua & White Technologies: December $31$ Balance Sheets

$($Thousands of Dollars$)$

Assets $20232022$

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$

$$0$

Joshua & White Technologies December $31$ Income Statements

$($Thousands of Dollars$)$

$20232022$

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 $20232022$

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 $20232022$ Industry Avg

Liquidity Ratios

Current Ratio $2\mathrm{.}58$

Quick Ratio $1\mathrm{.}53$

Asset Management Ratios

Inventory Turnover $($Total COGS$/$Inventories$)7\mathrm{.}69$

Days Sales Outstanding $47\mathrm{.}45$

Fixed Assets Turnover $2\mathrm{.}04$

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

Debt Management Ratios

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

Liabilities$-$to$-$assets ratio $32\mathrm{.}1\%$

Times$-$interest$-$earned ratio $15\mathrm{.}33$

EBITDA coverage ratio $4\mathrm{.}18$

Profitability Ratios

Profit Margin $8\mathrm{.}86\%$

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

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

Return on Equity $16\mathrm{.}10\%$

Market Value Ratios

Earnings per share NA

Price$-$to$-$earnings ratio $10\mathrm{.}65$

Cash flow per share NA

Price$-$to$-$cash flow ratio $7\mathrm{.}11$

Book Value per share NA

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

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

The current ratio and quick ratio were a little below the industry average initially. However, the quick ratio fell by a lot while the current ratio fell by just a little. This indicates a build$-$up in inventory relative to other current assets.

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

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

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

ROE $=$ PM x TA Turnover x Equity Multiplier

$2023$

$2022$

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 $20232022$

Cash and cash equivalents

Short$-$term investments

Accounts Receivable

Inventories

Total current assets

Net fixed assets

Total assets

Liabilities and equity $20232022$

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 $20232022$

Sales

COGS except excluding depr. and amort.

Depreciation and Amortization

Other operating expenses

EBIT

Interest Expense

EBT

Taxes $(25\%)$

Net Income

f$.$ Perform a percent change analysis. What does this tell you about the change in profitability

and asset utilization?

Percent Change Balance Sheets Base

Assets $20232022$

Cash and cash equivalents

Short$-$term investments

Accounts Receivable

Inventories

Total current assets

Net fixed assets

Total assets

Base

Liabilities and equity $20232022$

Accounts payable

Accruals

Notes payable

Tota