eBook Calculator Problem 3-26 The Protek Company is a large manufacturer and distributor of electronic components. Because of some successful new products marketed to manufacturers of computers and mobile electronic devises, the firm has recently undergone a period of explosive growth, more than doubling its revenues during the last two years. However, the growth has been accompanied by a marked decline in profitability and a precipitous drop in the company's stock price. You are a financial consultant who has been retained to analyze the company's performance and find out what's going wrong. Your investigative plan involves conducting a series of in-depth interviews with management and doing some independent research on the industry. However, before starting, you want to focus your thinking to be sure you can ask the right questions. You'll begin by analyzing the firm's financial statements over the last three years, which are shown below. The following additional Information is provided with the financial statements. Depreciation for 20x1, 20x2, and 20x3 was $200, $250, and $275 million respectively. No stock was sold or repurchased, and like many fast-growing companies, Protek paid no dividends. Assume the tax rate is a flat 34% and the firm pays 10% interest on its debt. Protek Company Income Statements For the periods ended 12/31 ($000,000) 20x2 20X1 $ 1524 Sales COGS Gross margin $ 2090 906 20x3 $3231 1502 $ 1729 631 $ 893 $ 1184 Expenses $316 $495 $ 882 Marketing RAD 211 158 126 179 Oreck My Wodk eBook Calculator $ 495 Marketing R&D $ 316 158 211 $ 882 327 294 126 179 Administration Total expenses $ 600 $ 885 $ 1503 EBIT $ 293 $ 226 63 143 $ 230 $ 299 95 $ 204 69 $ 135 Interest EBT Tax EAT $ 83 28 $ 152 $ 55 Protek Company Balance Sheets For the periods ended 12/31 ($000,000) 20x1 20x2 20x3 ASSETS Cash $ $ 40 62 Accounts receivable 590 3d 175 90 295 351 151 Inventory $ 542 952 Current assets Fixed assets Check My Work ebook Valculator Fixed assets Gross Accumulated depreciation Net Total assets $ 1590 (610) $ 980 $ 1275 $ 2388 (860) $ 1528 $ 2070 $ 2711 (1135) $ 1576 $ 2528 Protek Company Balance Sheets For the periods ended 12/31 ($000,000) 201 20x2 20x3 LIABILITIES Accounts payable $ 56 $ 81 $ 134 Accruals 20 30 Current liabilities $ 71 $ 101 $ 164 Capital Long-term debt $ 630 $ 1260 $ 1600 Equity 709 764 Total liabilities & equity $1275 $ 2070 $ 2528 a. Construct common size income statements for 20x1, 20x2, and 20X3. Round your answers to 2 decimal places. 20x1 20x2 20x3 57 % Sales $ 1524 100 $ 2090 100 $ 3231 1 00 Check My Work a. Construct common size income statements for 20X1, 20x2, and 20X3. Round your answers to 2 decimal places. 20X1 20X2 20x3 Sales $ 1524 631 100 41.4 $ 2090 906 100 43.35 56.65 COGS $ 3231 1,502 $ 1729 1 00 46.49 Gross Margin $ 893 58.6 $ 1184 53.51 Expenses Marketing R&D $ 316 158 126 $ 600 20.7 x 10.4 X 8.3 X 39.4 X $ 495 211 179 $ 885 23.68 10.10 8.56 42.34 $ 882 327 294 $ 1503 27.30 10.12 9.10 46.52 Admin. Total Expenses EBIT 6.99 $ 293 63 4.43 $ 230 19.2 X 4.1 X 15.1 * 5.1 x 10.0 X $ 299 95 $ 204 $69 $ 135 Interest EBT Tax EAT 14.31 4.55 9.76 3.30 6.46 $ 226 143 $ 83 $ 28 $ 55 2.57 $ 78 0.87 $ 152 1.70 b. Construct statements of cash flows for 20x2 and 20X3. Use a minus sign, to indicate any decreases in cash or cash outflows. Check My Work
