External Funds Needed 3.13 Using the definitions below show that EFN can be written as pHist Asset needs will equal A x & The addition to retained earnings will equal PM(S)b x (1+g S Previous years sales A Total assets D Total debt E Total equity g Projected growth in sales PM Profit margin b- Retention (plowback) ratio MINICASE Ratios and Financial Planning at East Coast Yachts Dan Ervin was recently hired by East Coast Yachts individuals for pleasure use. Occasionally, a yacht to assist the company with its short-term financial is manufactured for purchase by a company for planning and also to evaluate the company's finan- business purposes. cial performance. Dan graduated from university five years ago with a finance degree, and he has a number of manufacturers. As with any industry been employed in the treasury department of a For- there are market le tune 500 company since then. The custom yacht industry is fragmented. with the industry ensures that no manufacturer domi- East Coast Yachts was founded 10 years ago nates the market. The competition in the market as by Larissa Warren. The company's operations well as the product cost, ensures that attention to are located near Lunenburg Nova Scotia, and the detail is a necessity. For instance. East Coast Yachts company is structured as an LLC (limited liability will spend 80 to 100 hours on hand buffing the company. The company has manufactured mid- stainless steel stem-iron, which is the metal cap on custom high-performance yachts for clients the yacht's bow that conceivably could collide with a over this period. and its products have received dock or another boat. excellent reviews for safety and reliability. The To get Dan started with his analysis, Larissa has company's yachts have also recently received provided the following financial statements. Dan the highest award for customer satisfaction. has gathered the industry ratios for the yacht manu- The yachts are primarily purchased by wealthy facturing industry East Coast Yachts 2015 Statement of Comprehensive Income $234,300,000 165,074,000 27,991,000 7,644,000 33,591,000 Cost of goods sold Earnings before interest and taxes s 29,378,400 11,751,360 S 17.627.040 Taxable income 5,288,112 Addition to retained earnings