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Chem-Med Company CHEM-MED COMPANY Income Statements 20XU20XW (in thousands) Pro Forma Income Statements 20XU 20XV 20XW 20XX 20XY 20XZ Net sales (all credit)............................ $ 777
Chem-Med Company
CHEM-MED COMPANY | ||||||
Income Statements | ||||||
20XU20XW (in thousands) | Pro Forma Income Statements | |||||
20XU | 20XV | 20XW | 20XX | 20XY | 20XZ | |
Net sales (all credit)............................ | $ 777 | $3,051 | $3,814 | $5,340 | $7,475 | $10,366 |
Cost of goods sold.............................. | 257 | 995 | 1,040 | 1,716 | 2,154 | 2,954 |
Gross profit........................................ | 520 | 2,056 | 2,774 | 3,624 | 5,321 | 7,412 |
Selling, etc., expenses......................... | 610 | 705 | 964 | 1,520 | 2,120 | 2,645 |
Other income (expenses)*................... | 0 | 0 | 0 | 500 | 0 | 0 |
Operating profit................................... | (90) | 1,351 | 1,810 | 2,604 | 3,201 | 4,767 |
Interest expense.................................... | 11 | 75 | 94 | 202 | 302 | 434 |
Income before tax................................ | (101) | 1,276 | 1,716 | 2,402 | 2,899 | 4,333 |
Income taxes........................................ | ||||||
(40% in 20XV; 33% thereafter)....... | 0 | 510 | 566 | 793 | 957 | 1,430 |
Net income.......................................... | ($ 101) | $ 766 | $1,150 | $1,609 | $1,942 | $ 2,903 |
Dividends paid.................................... | 0 | 0 | 0 | 0 | 0 | 0 |
Increase in retained earnings............. | $ (101) | $ 766 | $1,150 | $1,609 | $1,942 | $ 2,903 |
Average number of shares**............... | 2,326 | 2,326 | 2,347 | 2,347 | 2,347 | 2,347 |
Earnings per share.............................. | ($0.04) | $0.33 | $0.49 | $0.69 | $0.83 | $1.24 |
*Other income (expenses) refers to extraordinary gains and losses. In 20XX, $500,000 is expected from Pharmacia Inc., in settlement of the lawsuit. **Shares are not publicly traded. | ||||||
Table 1 |
CHEM-MED COMPANY | ||||||
Balance Sheets (in thousands) | ||||||
Pro Forma Balance Sheets as of Dec. 31, years ended: | ||||||
20XU | 20XV | 20XW | 20XX | 20XY | 20XZ | |
Assets | ||||||
Cash and equivalent..................................... | $ 124 | $ 103 | $ 167 | $ 205 | $ 422 | $ 101 |
Accounts receivable..................................... | 100 | 409 | 564 | 907 | 1,495 | 2,351 |
Inventories....................................................... | 151 | 302 | 960 | 1,102 | 1,443 | 798 |
Other current.................................................. | 28 | 59 | 29 | 41 | 57 | 11 |
Total current assets................................ | 403 | 873 | 1,720 | 2,255 | 3,417 | 3,261 |
Property, plant, & equipment...................... | 1,901 | 2,298 | 2,917 | 4,301 | 5,531 | 8,923 |
Less: Accumulated amortization......... | 81 | 82 | 346 | 413 | 522 | 588 |
Property, plant, & equipment net.............. | 1,820 | 2,216 | 2,571 | 3,888 | 5,009 | 8,335 |
Other capital assets...................................... | 0 | 101 | 200 | 200 | 215 | 399 |
Total assets..................................................... | $2,223 | $3,190 | $4,491 | $6,343 | $8,641 | $11,995 |
Liabilities | ||||||
Accounts payable......................................... | $210 | $ 405 | $ 551 | $771 | $1,080 | $ 1,512 |
Short-term debt............................................. | 35 | 39 | 42 | 59 | 82 | 135 |
Total current liabilities............................. | 245 | 444 | 593 | 830 | 1,162 | 1,647 |
Long-term debt.............................................. | 17 | 19 | 21 | 27 | 50 | 17 |
Total liabilities........................................... | 262 | 463 | 614 | 857 | 1,212 | 1,664 |
Equity | ||||||
Common stock.............................................. | 2,062 | 2,062 | 2,062 | 2,062 | 2,062 | 2,062 |
Retained earnings......................................... | (101) | 665 | 1,815 | 3,424 | 5,366 | 8,269 |
Total equity................................................ | 1,961 | 2,727 | 3,877 | 5,486 | 7,428 | 10,331 |
Total liabilities and equity............................ | $2,223 | $3,190 | $4,491 | $6,343 | $8,640 | $11,995 |
Table 2 |
Biotechnology Industry StatisticsMedian Company in Biological Products | |||
20XU | 20XV | 20XW | |
Current ratio.................................. | 2.5 | 2.3 | 2.4 |
Quick ratio..................................... | 1.2 | 1.1 | 1.3 |
Inventory turnover......................... | 5.5 | 5.6 | 5.7 |
Total asset turnover........................ | 1.15 | 1.16 | 1.18 |
Return on sales.............................. | 4.00% | 4.00% | 5.00% |
Return on assets.............................. | 4.60% | 4.64% | 5.90% |
Return on equity............................ | 7.64% | 8.44% | 12.29% |
Total debt to assets......................... | 0.40 | 0.45 | 0.52 |
Selected Statistics, Pharmacia Company | |||
20XU | 20XV | 20XW | |
Current ratio................................... | 2.8 | 2.7 | 2.8 |
Quick ratio..................................... | 1.5 | 1.3 | 1.6 |
Inventory turnover.......................... | 5.6 | 5.7 | 5.8 |
Total asset turnover......................... | 1.9 | 2 | 1.9 |
Return on sales.............................. | 6.00% | 6.50% | 7.00% |
Return on assets.............................. | 11.40% | 13.00% | 13.30% |
Return on equity............................ | 19.04% | 27.66% | 29.56% |
Total debt to assets........................ | 0.40 | 0.53 | 0.55 |
Price-earnings ratio......................... | 13.7 | 14 | 15 |
Average share price....................... | $21.78 | $24.92 | $31.50 |
Table 3 | |||
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- What is the companys rate of net income growth in 20XX, 20XY, and 20XZ? Is projected net income growing faster or slower than projected sales? After computing these values, take a hard look at the 20XX income statement data to see if you want to make any adjustments.
- How does ChemMeds current ratio for 20XW compare to Pharmacias? How does it compare to the industry average? Compute ChemMeds current ratio for 20XZ. Is there any problem with it?
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