1. Copy the Big Rock Candy Mountain Mining financial statements from Problem 1 in Chapter 2 into a new workbook. SHOW DETAILED ANSWERS ON EXCEL FORMULAS

   1. Set up a ratio worksheet similar to the one in Exhibit 3-6 , page 99, and calculate all of the ratios for the firm.

   2. Identify areas of concern, if any, using the ratios. Identify areas that have shown improvement, if any.

   3. In 2020 the ROE increased. Explain, in words, why this increase occurred using the DuPont method from equation (3-29). Now use the extended DuPont method from equation (3-33).

   4. Big Rock Candy Mountain Mining has shown an accounting profit in each of the past two years. Calculate the economic profit for these years and compare it to net income. The WACC is 9%.

   5. Using Altmans model for privately held firms, calculate the Z-score for Big Rock Candy Mountain Mining. Does it appear that the firm is in imminent danger of bankruptcy?

M21 E F G . Big Rock Candy Mountain Mining Co. Balance Sheet For the Year ended December 31, 2020 2020 2019 D 3 Big Rock Candy Mountain Mining Co. 4 Income Statements 5 For the Years 2019 and 2020 6 2020 2019 7 Sales $ 412,500 $ 398,600 8 Cost of Goods 318,786 315,300 9 Gross Profit 93,714 83,300 10 Depreciation 29,800 29,652 11 Selling & Admin Expense 26,250 24,550 12 Other Operating Expense 1,210 1,245 13 Net Operating Income 36,454 27,853 14 Interest Expense 8,582 8,457 15 Earnings Before Taxes 27,872 19,396 16 Taxes 6,968 4,849 17 Net Income 20,904 14,547 18 19 Notes: 20 Tax Rate 25.00% 25.00% 21 Shares $ 52.100 52.100 22 Earnings Per Share $ 0.40 $ 0.40 23 24 25 Assets Cash Marketable Securities Accounts Receivable Inventory Total Current Assets Gross Fixed Assets Accumulated Depreciation Net Plant & Equipment Total Assets $ 16,435 $ 11,596 3,656.00 619.00 45,896 47,404 52,397 54,599 118,384 114,218 436,573 397,023 87,450 57,650 349,123 339,373 467,507 453,591 Liabilities & Owner's Equity Accounts Payable Accrued Expenses Total Current Liabilities Long-Term Debt Total Liabilities Common Stock ($1.00 par) Additional Paid-in-Capital Retained Earnings Total Owner's Equity Total Liab. & Owner's Equity $37,752 $36,819 3,183 3,085 40,935 39,904 170,562 178,581 211,497 218,485 58,664 58,664 136,807 136,807 60,539 39,635 256,010 235,106 26 27 467,507 453,591 28 29 1 2 Elvis Products International Ratio Analysis for 2019 and 2020 Industry 2020 2.70x 1.00x 7.00x 10.70x 33.64 days 11.20x 2.60x 3 Ratio 2020 2019 4 Liquidity Ratios 5 Current Ratio 2.39x 2.33x 6 Quick Ratio 0.84x 0.85x 7 Efficiency Ratios 8 Inventory Turnover 3.89x 4.00x 9 A/R Turnover 9.58x 9.77x 10 Average Collection Period 37.59 days 36.84 days 11 Fixed Asset Turnover 10.67x 9.95x 12 Total Asset Turnover 2.33x 2.34x 13 Leverage Ratios 14 Total Debt Ratio 58.45% 54.81% 15 Long-term Debt Ratio 25.72% 22.02% 16 LTD to Total Capitalization 38.23% 32.76% 17 Debt to Equity 1.41x 1.21x 18 LTD to Equity 61.90% 48.73% 19 Coverage Ratios 20 Times Interest Earned 1.97x 3.35x 21 Cash Coverage Ratio 2.23x 3.65x Profitability Ratios 23 Gross Profit Margin 15.58% 16.55% 24 Operating Profit Margin 3.89% 6.09% 25 Net Profit Margin 1.44% 3.20% 26 Return on Total Assets 3.35% 7.49% 27 Return on Equity 8.06% 16.56% 28 Return on Common Equity 8.06% 16.56% 50.00% 20.00% 28.57% 1.00x 40.00% 2.50x 2.80x 22 17.50% 6.25% 3.50% 9.10% 18.20% 18.20% M21 E F G . Big Rock Candy Mountain Mining Co. Balance Sheet For the Year ended December 31, 2020 2020 2019 D 3 Big Rock Candy Mountain Mining Co. 4 Income Statements 5 For the Years 2019 and 2020 6 2020 2019 7 Sales $ 412,500 $ 398,600 8 Cost of Goods 318,786 315,300 9 Gross Profit 93,714 83,300 10 Depreciation 29,800 29,652 11 Selling & Admin Expense 26,250 24,550 12 Other Operating Expense 1,210 1,245 13 Net Operating Income 36,454 27,853 14 Interest Expense 8,582 8,457 15 Earnings Before Taxes 27,872 19,396 16 Taxes 6,968 4,849 17 Net Income 20,904 14,547 18 19 Notes: 20 Tax Rate 25.00% 25.00% 21 Shares $ 52.100 52.100 22 Earnings Per Share $ 0.40 $ 0.40 23 24 25 Assets Cash Marketable Securities Accounts Receivable Inventory Total Current Assets Gross Fixed Assets Accumulated Depreciation Net Plant & Equipment Total Assets $ 16,435 $ 11,596 3,656.00 619.00 45,896 47,404 52,397 54,599 118,384 114,218 436,573 397,023 87,450 57,650 349,123 339,373 467,507 453,591 Liabilities & Owner's Equity Accounts Payable Accrued Expenses Total Current Liabilities Long-Term Debt Total Liabilities Common Stock ($1.00 par) Additional Paid-in-Capital Retained Earnings Total Owner's Equity Total Liab. & Owner's Equity $37,752 $36,819 3,183 3,085 40,935 39,904 170,562 178,581 211,497 218,485 58,664 58,664 136,807 136,807 60,539 39,635 256,010 235,106 26 27 467,507 453,591 28 29 1 2 Elvis Products International Ratio Analysis for 2019 and 2020 Industry 2020 2.70x 1.00x 7.00x 10.70x 33.64 days 11.20x 2.60x 3 Ratio 2020 2019 4 Liquidity Ratios 5 Current Ratio 2.39x 2.33x 6 Quick Ratio 0.84x 0.85x 7 Efficiency Ratios 8 Inventory Turnover 3.89x 4.00x 9 A/R Turnover 9.58x 9.77x 10 Average Collection Period 37.59 days 36.84 days 11 Fixed Asset Turnover 10.67x 9.95x 12 Total Asset Turnover 2.33x 2.34x 13 Leverage Ratios 14 Total Debt Ratio 58.45% 54.81% 15 Long-term Debt Ratio 25.72% 22.02% 16 LTD to Total Capitalization 38.23% 32.76% 17 Debt to Equity 1.41x 1.21x 18 LTD to Equity 61.90% 48.73% 19 Coverage Ratios 20 Times Interest Earned 1.97x 3.35x 21 Cash Coverage Ratio 2.23x 3.65x Profitability Ratios 23 Gross Profit Margin 15.58% 16.55% 24 Operating Profit Margin 3.89% 6.09% 25 Net Profit Margin 1.44% 3.20% 26 Return on Total Assets 3.35% 7.49% 27 Return on Equity 8.06% 16.56% 28 Return on Common Equity 8.06% 16.56% 50.00% 20.00% 28.57% 1.00x 40.00% 2.50x 2.80x 22 17.50% 6.25% 3.50% 9.10% 18.20% 18.20%