| A. Key input data for Vanguard Pharmaceuticals is listed below. This information includes the sales revenue from last year, the operating costs (excluding depreciation) as a % of sales, the total amount of net fixed assets at the end of last year, depreciation as a % of net fixed assets, total interest expense, the tax rate, and the % of net income that Vanguard paid out as dividends (the Dividend Payout Ratio). Given this information, construct Vanguard's income statement. Also calculate common dividends and the addition to retained earnings. | | | | | | | | | | | | | | | | | | | | The input information required for the problem is outlined in the "Key Input Data" section below. Using this data and the balance sheet above, we constructed the income statement shown below. | | | | | | | | | | | | | | Key Input Data for Vanguard Pharmaceuticals | | 2016 | | | | | (Thousands of dollars) | | | | | | | | Sales Revenue | | | | $227,500 | | | | | Expenses (excluding depreciation) as a percent of sales | 68.0% | | | | | Net fixed assets | | | $33,500 | | | | | Depr. as a % of net fixed assets | | 8.0% | | | | | Tax rate | | | | 32.0% | | | | | Interest expense | | | $4,275 | | | | | Dividend Payout Ratio | | | 20.0% | | | | | | | | | | | | | | Vanguard Pharmaceuticals: Income Statement (Thousands of dollars) | 2016 | | | | | Sales | | | | $227,500 | | | | | Operating costs excluding depreciation | | $154,700 | | | | | EBITDA | | | | $72,800 | | | | | Depreciation (Vanguard has no amortization charges) | $2,680 | | | | | EBIT | | | | $70,120 | | | | | Interest expense | | | $4,275 | | | | | EBT | | | | $65,845 | | | | | Taxes | | | | $21,070 | | | | | Net income | | | | $44,775 | | | | | | | | | | | | | | Common dividends | | | $8,955 | | | | | Addition to retained earnings | | | $35,820 | | | | | | | | | | | | | | B. Vanduard Pharmaceuticals' partial balance sheets are shown below. Vanguard issued $10,000,000 of new common stock in the most recent year. Using this information and the results from part a, fill in the missing values for common stock, retained earnings, total common equity, and total liabilities and equity. | | | | | | | | | | | | | | | | | | Dollar value of common stock issued (in thousands of dollars) | $10,000 | | | | | | | | | | | | | | Vanguard Industries December 31 Balance Sheets | | | | | | (in thousands of dollars) | | | | | | | | | | | | 2016 | 2015 | | | | Assets | | | | | | | | | Cash and cash equivalents | | | $136,920 | $74,625 | | | | Short-term investments | | | 11,400 | 15,100 | | | | Accounts Receivable | | | 108,470 | 85,527 | | | | Inventories | | | | 38,450 | 34,982 | | | | Total current assets | | | $295,240 | $210,234 | | | | Net fixed assets | | | 33,500 | 42,436 | | | | Total assets | | | | $328,740 | $252,670 | | | | | | | | | | | | | Liabilities and equity | | | | | | | | Accounts payable | | | $30,761 | $23,109 | | | | Accruals | | | | 30,405 | 22,656 | | | | Notes payable | | | | 12,717 | 14,217 | | | | Total current liabilities | | | $73,883 | $59,982 | | | | Long-term debt | | | | 80,263 | 63,914 | | | | Total liabilities | | | $154,146 | $123,896 | | | | Common stock | | | | $100,000 | $90,000 | | | | Retained earnings | | | 74,594 | 38,774 | | | | Total common equity | | | $174,594 | $128,774 | | | | Total liabilities and equity | | | $328,740 | $252,670 | | | | | | | | | | | | | Check for balancing (this should be zero): | | | | | | | | | | | | | | | | C. Construct the statement of cash flows for the most recent year. | | | | | | | | | | | | | Statement of Cash Flows | | | | | | | | (in thousands of dollars) | | | | | | | | | | | | | | | | | Operating Activities | | | | | | | | Net Income | | | | $44,775 | | | | | Adjustments: | | | | | | | | | Noncash adjustment: | | | | | | | | Depreciation | | | | $2,680 | | | | | Due to changes in working capital: | | | | | | | Due to change in accounts receivable | | ($22,943) | | | | | Due to change in inventories | | | ($3,468) | | | | | Due to change in accounts payable | | $7,652 | | | | | Due to change in accruals | | | $7,749 | | | | | Net cash provided (used) by operating activities | | $36,445 | | | | | | | | | | | | | | Investing Activities | | | | | | | | Cash used to acquire gross fixed assets | | $6,256 | | | | | Due to change in short-term investments | | $3,700 | | | | | Net cash provided (used) by investing activities | | $9,956 | | | | | | | | | | | | | | Financing Activities | | | | | | | | Due to change in notes payable | | ($1,500) | | | | | Due to change in long-term debt | | $16,349 | | | | | Due to change in common stock | | $10,000 | | | | | Payment of common dividends | | ($8,955) | | | | | Net cash provided (used) by financing activities | | $15,894 | | | | | | | | | | | | | | Net increase/decrease in cash | | | $62,295 | | | | | Add: Cash balance at the beginning of the year | | $74,625 | | | | | Cash balance at the end of the year | | $136,920 | | | | | | | | | | | | | | Check: cash balance in statement of cash flows should equal the cash on balance sheets as shown here: | | | | | | $136,920 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
