EXERCISE "A" IS ANSWERED. Need answers for "B" and "C".
Question 1: US REPUBLIC CORPORATION BALANCE SHEET, DECEMBER 31, 20X3 ASSETS Cash Accounts receivable Inventory Fixed assets, net $ 1,000,000 5,000,000 7,000,000 17,000,000 LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable, bank $ 4,000,000 Accounts payable 2,000,000 Accrued wages and taxes 2,000,000 Long-term debt 12,000,000 Preferred stock 4,000,000 Common stock 2,000,000 Retained earnings 4,000,000 Total liabilities and shareholders' equity $30,000,000 Total assets $30,000,000 $16,000,000 4,000,000 $20,000,000 US REPUBLIC CORPORATION STATEMENT OF INCOME AND RETAINED EARNINGS, YEAR ENDED DECEMBER 31, 20X3 Net sales Credit Cash Total Cost and Expenses Cost of goods sold $12,000,000 Selling, general, and administrative expenses 2,200,000 Depreciation 1,400,000 Interest 1,200,000 Net income before taxes Taxes on income Net income after taxes Less: Dividends on preferred stock Net income available to common shareholders Add: Retained earnings at 1/1/X3 Subtotal Less: Dividends paid on common stock Retained earnings 12/31/X3 $16,800,000 $3,200,000 1,200,000 $ 2,000,000 240,000 51,760,000 2,600,000 $ 4,360,000 360,000 $4,000,000 a. Fill in the 20x3 column in the table that follows. US Rupunuac CORPORATION 20X3 RATIO 1. Current ratio 2. Acid-test ratio 3. Receivable turnover 4. Inventory turnover 5. Long-term debt/total capitalization 6. Gross profit margin 7. Net profit margin 8. Return on equity 9. Return on investment 10. Total asset turnover 11. Interest coverage ratio 20X1 250% 100% 5.0x 4.0x 35% 39% 17% 15% 15% 0.9x 5.5% 20X2 200% 90% 4.5% 3.0% 40% 41% 15% 20% 12% 0.8% 4.5% INDUSTRY NORMS 225% 110% 6.0x 4.0x 33% 40% 15% 20% 12% 1.OX 5.0x Required: Fill in the ratios for 2003. Remember to completely Analyze the firm with trend analysis and Industry Analysis. Have a in Depth Review. Formula 2013 2012 2011 Industry Current assets/ Current liabilities Current ratio =(1000000+5000000+7000000Y(4000000+2000000+2000000) 162.50% 200.00% 250.00% 225.00% Current assets - Inventory / Current liabilities Acid test ratio = 1000000-5000000(4000000+2000000+2000000) 75.00% 90.00% 100.00% 110.00% Receivable turnover Total sales / Receivables =20000000/5000000 4.00 4.50 5.00 6.00 Inventory turnover Total sales / Inventory =20000000/7000000 2.86 3 4.00 4.00 Long term debt to capital Long term debt / Total capital = 12000000/( 12000000+4000000+2000000+4000000) 54.55% 40.00% 35.00% 33.00% Gross profit margin Gross profit Total sales =(20000000-12000000720000000 40.00% 41.00% 39.00% 40.00% Net profit margin Net income after taxes / Total sales =2000000/20000000 10.00% 15.00% 17.00% 15.00% Net income available to common shareholder / Common equity ROE =1760000/(2000000+4000000) 29.33% 20.00% 15.00% 20.00% Net income after taxes / Total Assets ROA =2000000/30000000 6.67% 12.00% 15.00% 12.00% Asset turnover Total sales / Total assets =20000000/30000000 0.67 0.80 0.90 1.00 Interest coverage EBIT/ Interest =(3200000+1200000/1200000 3.67 4.50 5.50 5.00 b. Evaluate the position of the company using information from the table. Cite specific ratio levels and trends as evidence. c. Indicate which ratios would be of most interest to you and what your decision would be in each of the following situations: (i) US Republic wants to buy $500,000 worth of merchandise inventory from you, with payment due in 90 days. (ii) US Republic wants you, a large insurance company, to pay off its note at the bank and assume it on a 10-year maturity basis at a current rate of 14 percent. Question 1: US REPUBLIC CORPORATION BALANCE SHEET, DECEMBER 31, 20X3 ASSETS Cash Accounts receivable Inventory Fixed assets, net $ 1,000,000 5,000,000 7,000,000 17,000,000 LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable, bank $ 4,000,000 Accounts payable 2,000,000 Accrued wages and taxes 2,000,000 Long-term debt 12,000,000 Preferred stock 4,000,000 Common stock 2,000,000 Retained earnings 4,000,000 Total liabilities and shareholders' equity $30,000,000 Total assets $30,000,000 $16,000,000 4,000,000 $20,000,000 US REPUBLIC CORPORATION STATEMENT OF INCOME AND RETAINED EARNINGS, YEAR ENDED DECEMBER 31, 20X3 Net sales Credit Cash Total Cost and Expenses Cost of goods sold $12,000,000 Selling, general, and administrative expenses 2,200,000 Depreciation 1,400,000 Interest 1,200,000 Net income before taxes Taxes on income Net income after taxes Less: Dividends on preferred stock Net income available to common shareholders Add: Retained earnings at 1/1/X3 Subtotal Less: Dividends paid on common stock Retained earnings 12/31/X3 $16,800,000 $3,200,000 1,200,000 $ 2,000,000 240,000 51,760,000 2,600,000 $ 4,360,000 360,000 $4,000,000 a. Fill in the 20x3 column in the table that follows. US Rupunuac CORPORATION 20X3 RATIO 1. Current ratio 2. Acid-test ratio 3. Receivable turnover 4. Inventory turnover 5. Long-term debt/total capitalization 6. Gross profit margin 7. Net profit margin 8. Return on equity 9. Return on investment 10. Total asset turnover 11. Interest coverage ratio 20X1 250% 100% 5.0x 4.0x 35% 39% 17% 15% 15% 0.9x 5.5% 20X2 200% 90% 4.5% 3.0% 40% 41% 15% 20% 12% 0.8% 4.5% INDUSTRY NORMS 225% 110% 6.0x 4.0x 33% 40% 15% 20% 12% 1.OX 5.0x Required: Fill in the ratios for 2003. Remember to completely Analyze the firm with trend analysis and Industry Analysis. Have a in Depth Review. Formula 2013 2012 2011 Industry Current assets/ Current liabilities Current ratio =(1000000+5000000+7000000Y(4000000+2000000+2000000) 162.50% 200.00% 250.00% 225.00% Current assets - Inventory / Current liabilities Acid test ratio = 1000000-5000000(4000000+2000000+2000000) 75.00% 90.00% 100.00% 110.00% Receivable turnover Total sales / Receivables =20000000/5000000 4.00 4.50 5.00 6.00 Inventory turnover Total sales / Inventory =20000000/7000000 2.86 3 4.00 4.00 Long term debt to capital Long term debt / Total capital = 12000000/( 12000000+4000000+2000000+4000000) 54.55% 40.00% 35.00% 33.00% Gross profit margin Gross profit Total sales =(20000000-12000000720000000 40.00% 41.00% 39.00% 40.00% Net profit margin Net income after taxes / Total sales =2000000/20000000 10.00% 15.00% 17.00% 15.00% Net income available to common shareholder / Common equity ROE =1760000/(2000000+4000000) 29.33% 20.00% 15.00% 20.00% Net income after taxes / Total Assets ROA =2000000/30000000 6.67% 12.00% 15.00% 12.00% Asset turnover Total sales / Total assets =20000000/30000000 0.67 0.80 0.90 1.00 Interest coverage EBIT/ Interest =(3200000+1200000/1200000 3.67 4.50 5.50 5.00 b. Evaluate the position of the company using information from the table. Cite specific ratio levels and trends as evidence. c. Indicate which ratios would be of most interest to you and what your decision would be in each of the following situations: (i) US Republic wants to buy $500,000 worth of merchandise inventory from you, with payment due in 90 days. (ii) US Republic wants you, a large insurance company, to pay off its note at the bank and assume it on a 10-year maturity basis at a current rate of 14 percent
