Chapter $3$

Problem $15$

Joshua & White Technologies: December $31$ Balance Sheets

$($Thousands of Dollars$)$

Assets $20182019$

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

Short$-$term investments $3,2403,759$

Accounts Receivable $48,00052,500$

Inventories $56,00084,000$

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

Net fixed assets $200,000223,097$

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

Liabilities and equity

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

Accruals $12,00012,600$

Notes payable $6,48019,929$

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

Long$-$term debt $58,32067,662$

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

Common stock $178,440178,440$

Retained Earnings $40,00072,125$

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

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

Joshua & White Technologies December $31$ Income Statements

$($Thousands of Dollars$)$

$20182019$

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

COGS except excluding depr. and amort. $298,000300,000$

Depreciation and Amortization $18,00019,660$

Other operating expenses $22,00027,600$

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

Interest Expense $4,4605,740$

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

Taxes $(25\%)14,38516,750$

Net Income $$43,155$ $$50,250$

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

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

Other Data $20182019$

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

# of shares $($Thousands$)4,0004,052$

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

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

Ratio Analysis $20182019$ 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.

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

$2019$

$2018$

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 $20182019$

Cash and cash equivalents

Short$-$term investments

Accounts Receivable

Inventories

Total current assets

Net fixed assets

Total assets

Liabilities and equity $20182019$

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 $20182019$

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.

Percent Change Balance Sheets $2019$

Assets vs $2018$

Cash and cash equivalents

Short$-$term investments

Accounts Receivable

Inventories

Total current assets

Net fixed assets

Total assets

$2019$

Liabilities and equity vs $2018$

Accounts payable

Accruals

Notes payable

Total current liabilities

Long$-$term debt

Total liabilities

Common stock

Retained Earnings

Total common equity

Total liabilities and equity

$2019$

Percent Change Income Statements vs $2018$

Sales

COGS except excluding depr. and amort.

Depreciation and Amortization

Other operating expenses

EBIT

Interest Expense

EBT

Taxes $(25\%)$

Net Income

What does this tell you about the change in profitability and asset utilization?