Question
Hard Rock Cos Income statement 2017 2016 Sales 7,250,000 6,750,000 Cost of Goods Sold 5,400,000 5,330,000 Gross Profit 1,850,000 1,420,000 Selling and G&A Expenses 965,000
Hard Rock Cos Income statement
| 2017 | 2016 |
Sales | 7,250,000 | 6,750,000 |
Cost of Goods Sold | 5,400,000 | 5,330,000 |
Gross Profit | 1,850,000 | 1,420,000 |
Selling and G&A Expenses | 965,000 | 632,000 |
Depreciation | 550,000 | 550,000 |
EBIT | 335,000 | 238,000 |
Interest Expense | 130000 | 110,000 |
Earnings Before Taxes | 205,000 | 128,000 |
Taxes | 71,750 | 48,900 |
Net Income | 133,250 | 79,100 |
Notes: | ||
Tax Rate | 0.35 | 0.382 |
Shares Outstanding | 75,000 | 65,000 |
Earnings per Share | 1.78 | 1.22 |
Dividends per Share | 0.89 | 0.73 |
Addition to RE per Share | 0.89 | 0.49 |
Dividend Payout Ratio | 50% | 60% |
Hard Rock Cos Balance Sheet
Assets | 2017 | 2016 |
Cash | 149,970 | 100,000 |
Accounts Receivable | 370,000 | 347,000 |
Inventory | 870,000 | 515,000 |
Total Current Assets | 1,389,970 | 962,000 |
Plant & Equipment | 6,570,000 | 5,010,000 |
Accumulated Depreciation | 1,930,000 | 1,380,000 |
Net Fixed Assets | 4,640,000 | 3,630,000 |
Total Assets | 6,029,970 | 4,592,000 |
Liabilities and Owners' Equity |
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|
Accounts Payable | 420,000 | 321,440 |
Notes Payable | 166,625 | 22,960 |
Total Current Liabilities | 586,625 | 344,400 |
Long-term Debt | 1,350,000 | 918,400 |
Total Liabilities | 1,936,625 | 1,262,800 |
Common Stock | 2520000.00 | 2043440.00 |
Additional Paid-in-Capital | 772000.00 | 551040.00 |
Retained Earnings | 801345.00 | 734720.00 |
Total Shareholder's Equity | 4,093,345 | 3,329,200 |
Total Liab. and Owners' Equity | 6,029,970 | 4,592,000 |
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- Calculate all the financial ratios.
- Identify at least two areas of potential concerns using the financial ratios. Identify at least two
areas that have shown improvement using the financial ratios.
- In 2017 the ROE increased. Using the DuPont analysis to explain what leads to the increase
in ROE. Using the extended DuPont analysis to explain what leads to the increase
in ROE.
- Calculate the economic profit for both years and compare it to net income. The WACC is 10%.
- Hard Rock Co. is a public firm. The stock prices at the end of 2017 and 2016 are $80 per share and
$70 per share, respectively. Calculate its Z-scores in 2017 and 2016, respectively.
Does it appear the firm is in imminent danger of bankruptcy?
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