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Posted on Jul 27, 2024

EAST COAST YACHTS: QUESTION 3 PLEASE. Cover 217 / 1918 $231,900,000 170,157,000 27,711,200 7,566.900 Sales Cost of goods sold Other expenses Depreciation Earnings before interest

image text in transcribed EAST COAST YACHTS: QUESTION 3 PLEASE.

Cover 217 / 1918 $231,900,000 170,157,000 27,711,200 7,566.900 Sales Cost of goods sold Other expenses Depreciation Earnings before interest and taxes (EBIT) Interest Taxable income $ 26,464,900 4,170,100 $ 22,294,800 4,681,908 $ 17,612,892 Taxes (21%) Net income Dividends Additions to retained earnings $7,925,000 $9,687,892 EAST COAST YACHTS Balance Sheet as of December 31, 2019 Assets Liabilities & Equity Current assets $ 3,614,200 Current liabilities Accounts payable Notes payable Total Cash Accounts receivable Inventory Total $ 6,977,70 6,501,900 7.290,100 $ 17,406,200 15,776,90 $ 22,754,60 Long-term debt $ 40,100.00 Fixed assets Net plant and equipment $111.629.300 Shareholders' $ 6,140,00 60.040.90 equity Common stock Retained earnings Total equity Total liabilities and equity $ 66,180,90 Total assets $129,035,500 $129,035,50 Yacht Industry Ratios Lower Quartile Upper Quartile, Median .50 1.43 .38 1.89 .62 .68 .85 1.38 6.85 9.15 16.13 6.27 21.45 Current ratio Quick ratio Total asset turnover Inventory turnover Receivables turnover Debt ratio Debt-equity ratio Equity multiplier Interest coverage Profit margin Return on assets 11.81 .52 .44 .61 .79 1.08 2.08 1.56 2.56 1.79 5.18 4.05% 8.06 6.98% 9.83 9.87% 6.05% 10.53% 15.83% Return on equity 9.93% 16.54% 28.14% 84 ensures that attention to detail is a necessity. For example, East Coast Yachts will spend 80 to 100 hours on hand-buffing the stainless steel stem-iron, which is the metal cap on the yacht's bow that conceivably could collide with a dock or another boat. To get Dan started with his analyses, Larissa has provided the financial statements. Dan has gathered the industry ratios for the yacht manufacturing industry. 1. Calculate all of the ratios listed in the industry table for East Coast Yachts. 2. Compare the performance of East Coast Yachts to the industry as a whole. For each ratio, comment on why it might be viewed as positive or negative relative to the industry. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How do you interpret this ratio? How does East Coast Yachts compare to the industry average? 3. Calculate the sustainable growth rate of East Coast Yachts. Calculate EFN and prepare pro forma income statements and balance sheets assuming growth at precisely this rate. Recalculate the ratios in the previous question. What do you observe? 4. East Coast Yachts is unlikely to be willing to raise external equity capital, in part because the owners don't want to dilute their existing ownership and control positions. However, East Coast Yachts is planning for a growth rate of 20 percent next year. What are your conclusions and recommendations about the feasibility of East Coast's expansion plans? 5. Most assets can be increased as a percentage of sales. Cover 217 / 1918 $231,900,000 170,157,000 27,711,200 7,566.900 Sales Cost of goods sold Other expenses Depreciation Earnings before interest and taxes (EBIT) Interest Taxable income $ 26,464,900 4,170,100 $ 22,294,800 4,681,908 $ 17,612,892 Taxes (21%) Net income Dividends Additions to retained earnings $7,925,000 $9,687,892 EAST COAST YACHTS Balance Sheet as of December 31, 2019 Assets Liabilities & Equity Current assets $ 3,614,200 Current liabilities Accounts payable Notes payable Total Cash Accounts receivable Inventory Total $ 6,977,70 6,501,900 7.290,100 $ 17,406,200 15,776,90 $ 22,754,60 Long-term debt $ 40,100.00 Fixed assets Net plant and equipment $111.629.300 Shareholders' $ 6,140,00 60.040.90 equity Common stock Retained earnings Total equity Total liabilities and equity $ 66,180,90 Total assets $129,035,500 $129,035,50 Yacht Industry Ratios Lower Quartile Upper Quartile, Median .50 1.43 .38 1.89 .62 .68 .85 1.38 6.85 9.15 16.13 6.27 21.45 Current ratio Quick ratio Total asset turnover Inventory turnover Receivables turnover Debt ratio Debt-equity ratio Equity multiplier Interest coverage Profit margin Return on assets 11.81 .52 .44 .61 .79 1.08 2.08 1.56 2.56 1.79 5.18 4.05% 8.06 6.98% 9.83 9.87% 6.05% 10.53% 15.83% Return on equity 9.93% 16.54% 28.14% 84 ensures that attention to detail is a necessity. For example, East Coast Yachts will spend 80 to 100 hours on hand-buffing the stainless steel stem-iron, which is the metal cap on the yacht's bow that conceivably could collide with a dock or another boat. To get Dan started with his analyses, Larissa has provided the financial statements. Dan has gathered the industry ratios for the yacht manufacturing industry. 1. Calculate all of the ratios listed in the industry table for East Coast Yachts. 2. Compare the performance of East Coast Yachts to the industry as a whole. For each ratio, comment on why it might be viewed as positive or negative relative to the industry. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How do you interpret this ratio? How does East Coast Yachts compare to the industry average? 3. Calculate the sustainable growth rate of East Coast Yachts. Calculate EFN and prepare pro forma income statements and balance sheets assuming growth at precisely this rate. Recalculate the ratios in the previous question. What do you observe? 4. East Coast Yachts is unlikely to be willing to raise external equity capital, in part because the owners don't want to dilute their existing ownership and control positions. However, East Coast Yachts is planning for a growth rate of 20 percent next year. What are your conclusions and recommendations about the feasibility of East Coast's expansion plans? 5. Most assets can be increased as a percentage of sales