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Financial Statements Use these balance sheets for the following problems: Watson Industries December 31 Balance Sheets (in thousands of dollars) 2013 2012 Assets Cash and
| Financial Statements | ||||||||||
| Use these balance sheets for the following problems: | ||||||||||
| Watson Industries December 31 Balance Sheets | ||||||||||
| (in thousands of dollars) | ||||||||||
| 2013 | 2012 | |||||||||
| Assets | ||||||||||
| Cash and cash equivalents | $91,450 | $74,625 | ||||||||
| Short-term investments | $11,400 | $15,100 | ||||||||
| Accounts Receivable | $103,365 | $85,527 | ||||||||
| Inventories | $38,444 | $34,982 | ||||||||
| Total current assets | $244,659 | $210,234 | ||||||||
| Net fixed assets | $67,165 | $42,436 | ||||||||
| Total assets | $311,824 | $252,670 | ||||||||
| Liabilities and equity | ||||||||||
| Accounts payable | $30,761 | $23,109 | ||||||||
| Accruals | $30,477 | $22,656 | ||||||||
| Notes payable | $16,717 | $14,217 | ||||||||
| Total current liabilities | $77,955 | $59,982 | ||||||||
| Long-term debt | $76,264 | $63,914 | ||||||||
| Total liabilities | $154,219 | $123,896 | ||||||||
| Common stock | $100,000 | $90,000 | ||||||||
| Retained Earnings | $57,605 | $38,774 | ||||||||
| Total common equity | $157,605 | $128,774 | ||||||||
| Total liabilities and equity | $311,824 | $252,670 | ||||||||
| a. The companys 2013 sales were $455,150,000, and EBITDA was 15 percent of sales. Furthermore, depreciation amounted to 11 percent of net fixed assets, interest charges were $8,575,000, the state-plus-federal corporate tax rate was 40 percent, and Watson pays 40 percent of its net income out in dividends. Given this information, construct Watson's 2013 income statement. | ||||||||||
| The input information required for the problem is outlined in the "Key Input Data" section below. Using this data and the balance sheet above, we constructed the income statement shown below. | ||||||||||
| Key Input Data for Watson Industries | ||||||||||
| Sales Revenue | $455,150 | |||||||||
| EBITDA as a percent of sales | 15% | |||||||||
| Depr. as a % of Fixed Assets | 11% | |||||||||
| Tax rate | 40% | |||||||||
| Interest Expense | $8,575 | |||||||||
| Dividend Payout Ratio | 40% | |||||||||
| 2013 | 2012 | |||||||||
| Sales | $364,120 | |||||||||
| Expenses excluding depreciation and amortization | $321,109 | |||||||||
| EBITDA | $43,011 | |||||||||
| Depreciation (Cumberland has no amortization charges) | $6,752 | |||||||||
| EBIT | $36,259 | |||||||||
| Interest Expense | $7,829 | |||||||||
| EBT | $28,430 | |||||||||
| Taxes (40%) | $11,372 | |||||||||
| Net Income | $17,058 | |||||||||
| Common dividends | $6,823 | |||||||||
| Addition to retained earnings | $10,235 | |||||||||
| b. Next, construct the firms statement of retained earnings for the year ending December 31, 2013, and then its 2013 statement of cash flows. | ||||||||||
| Statement of Retained Earnings | ||||||||||
| (in thousands of dollars) | ||||||||||
| Balance of Retained Earnings, December 31, 2012 | ||||||||||
| Add: Net Income, 2013 | ||||||||||
| Less: Common dividends paid, 2013 | ||||||||||
| Balance of Retained Earnings, December 31, 2013 | ||||||||||
| Statement of Cash Flows | ||||||||||
| (in thousands of dollars) | ||||||||||
| Operating Activities | ||||||||||
| Net Income | ||||||||||
| Adjustments: | ||||||||||
| Noncash adjustment: | ||||||||||
| Depreciation | ||||||||||
| Due to changes in working capital: | ||||||||||
| Increase in accounts receivable | ||||||||||
| Increase in inventories | ||||||||||
| Increase in accounts payable | ||||||||||
| Increase in accruals | ||||||||||
| Decrease in short-term investments | ||||||||||
| Net cash provided by operating activities | $0 | |||||||||
| Investing Activities | ||||||||||
| Cash used to acquire gross fixed assets | ||||||||||
| Net cash provided by investing activities | $0 | |||||||||
| Financing Activities | ||||||||||
| Increase in notes payable | ||||||||||
| Increase in long-term debt | ||||||||||
| Increase in common stock | ||||||||||
| Payment of common dividends | ||||||||||
| Net cash provided by financing activities | $0 | |||||||||
| Net increase/decrease in cash | ||||||||||
| Add: Cash balance at the beginning of the year | ||||||||||
| Cash balance at the end of the year | ||||||||||
| c. Calculate operating cash flow, net working capital, capital spending, and free cash flow for 2013. | ||||||||||
| Operating Cash Flow | ||||||||||
| OCF13 = | EBIT | Depreciation | - | Taxes | ||||||
| = | + | - | ||||||||
| = | ||||||||||
| Net Working Capital | ||||||||||
| NWC13 = | current assets | - | current liabilities | |||||||
| = | ||||||||||
| = | ||||||||||
| NWC12 = | current assets | - | current liabilities | |||||||
| = | ||||||||||
| = | ||||||||||
| Investment in Net Working Capital | ||||||||||
| Change in NWC | NWC13 | - | NWC12 | |||||||
| = | ||||||||||
| Net Capital Spending | ||||||||||
| CAPEX13 = | Net Fixed Assets13 | Net Fixed Assets12 | + | Depreciation | ||||||
| = | - | |||||||||
| = | ||||||||||
| Free Cash Flow | ||||||||||
| CFFA (or FCF)13 = | Operating Cash Flow | - | Net Capital Spending | - | Change in Net Working Capital | |||||
| = | - | |||||||||
| = | ||||||||||
| d. Compute the following financial ratios and interpret each group in one or two sentences | ||||||||||
| Liquidity Ratios | 2013 | 2012 | ||||||||
| Current Ratio | ||||||||||
| Quick Ratio | ||||||||||
| Short General Interpretation- LIQUIDITY RATIOS (no more than 2 sentences): | ||||||||||
| Solvency Ratios | ||||||||||
| 2013 | 2012 | |||||||||
| Total Debt Ratio | ||||||||||
| Times Interest Earned Ratio | ||||||||||
| Short General Interpretation- SOLVENCY RATIOS (no more than 2 sentences): | ||||||||||
| Profitability Ratios | 2013 | 2012 | ||||||||
| Profit Margin | ||||||||||
| Return on Assets | ||||||||||
| Return on Equity | ||||||||||
| Short General Interpretation - PROFITABILITY RATIOS (no more than 2 sentences): | ||||||||||
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Project Financing Analyzing And Structuring Projects
Authors: Frank J Fabozzi, Carmel De Nahlik
1st Edition
9811232393, 9789811232398
