I 1. Billy Bishop has recently been approached by his father-in-law, Jack Wilde, with a proposal to buy 30 percent interest in Panchetta Sporting Goods. The firm manufactures golf clubs, baseball bats, basketball nets, and other similar items. Mr. Wilde is quick to point out the increase in sales that has occurred over the past three years as indicated in the following income statement. The annual growth rate was 20 percent. During this time there was a steady real growth of 2 to 3 percent in GDP during the period under study. The rate of inflation was in the 3 to 4 percentage range Stock in this company was available because of the ill-health of a major shareholder The company currently does not pay dividends, and a return would come through selling the stock in the future. Would you invest?|| PANCHETTA SPORTING GOODS Income Statements Year Ended 2018 2017 2016 I Sales (all on credit) $ 2.160,000 $ 1,800,000 $1,500,000 Cost of goods sold. 1,300,000 1,120,000 950,000 Gross profit 860,000 680,000 550,000 Selling/administrative expense" 590,000 490,000 380,000 Operating profit (EBIT) 270,000 190,000 170,000 Interest expense 85.000 40,000 30,000 Net income before taxes, 185.000 150,000 140,000 Taxes 64,850 48,720 46,120 Net income $ 120,150 $ 101,280 $ 93,880 Shares 46.000 40,000 40,000 $2,61 $2.53 Earnings per share $2.35 Includes $15,000 in leate payments for each war PANCHETTA SPORTING GOODS Balance Sheet Dec. 31. I 2018 2017 2016 Assets Cash $ 20,000 $ 30,000 $ 20.000 50.000 Marketable securities 35,000 30.000 330,000 230,000 150,000 Accounts receivable 325,000 285,000 250,000 450,000 725,000 580,000 Inventory Total current assets Net plant and equipment Total assets 1.169.000 720,000 550,000 $1,894,000 $ 1,300,000 $1,000,000 Liabilities and Shareholders' Equity Accounts payable.... $ 200,000 $ 225,000 $ 100,000 Accrued expenses. 300,000 100,000 100,000 Total current liabilities.. 500,000 325,000 200,000 Long-term liabilities.. 550,740 331,120 250.000 Total liabilities.. 1,050,740 656,120 450,000 Common stock.. 540,000 450,000 450,000 Retained earnings.. 303,260 193,880 100,000 Total shareholders' equity. 843,260 643,880 550,000 Total liabilities and shareholders' equity $1,894,000 $1,300,000 $ 1,000,000 Selected INDUSTRY Ratios 20XX 20XW 20XV Growth in sales. - 10.02% 9.98% 5.81% Profit margin.. 5.80% 5.75% 8.48% 8.24% 8.22% Return on assets (investment) Return on equity 10.10% 13.62% 13.26% 9.31% 9.50% 10.00 Receivables turnover. Average collection period.. 35.6 days 37.9 days 36.0 days 5.84x 5.62% 5.71% Inventory tumover. 2.20 2.66% 2.75% Capital asset turnover. 1.46% 1.42x 1.43x Total asset turnover. 2.15% 2.08% 2.10 Current ratio 1.10X 1.02x 1.05X Quick ratio. 40.10% 39.50% 38.00% Debt to total assets. 5.26% 5.20x 5.00 Times interest earned 3.97% 3.95% 3.85% Fixed charge coverage... 9.80% 9.706 Growth in earnings per share. I 1. Billy Bishop has recently been approached by his father-in-law, Jack Wilde, with a proposal to buy 30 percent interest in Panchetta Sporting Goods. The firm manufactures golf clubs, baseball bats, basketball nets, and other similar items. Mr. Wilde is quick to point out the increase in sales that has occurred over the past three years as indicated in the following income statement. The annual growth rate was 20 percent. During this time there was a steady real growth of 2 to 3 percent in GDP during the period under study. The rate of inflation was in the 3 to 4 percentage range Stock in this company was available because of the ill-health of a major shareholder The company currently does not pay dividends, and a return would come through selling the stock in the future. Would you invest?|| PANCHETTA SPORTING GOODS Income Statements Year Ended 2018 2017 2016 I Sales (all on credit) $ 2.160,000 $ 1,800,000 $1,500,000 Cost of goods sold. 1,300,000 1,120,000 950,000 Gross profit 860,000 680,000 550,000 Selling/administrative expense" 590,000 490,000 380,000 Operating profit (EBIT) 270,000 190,000 170,000 Interest expense 85.000 40,000 30,000 Net income before taxes, 185.000 150,000 140,000 Taxes 64,850 48,720 46,120 Net income $ 120,150 $ 101,280 $ 93,880 Shares 46.000 40,000 40,000 $2,61 $2.53 Earnings per share $2.35 Includes $15,000 in leate payments for each war PANCHETTA SPORTING GOODS Balance Sheet Dec. 31. I 2018 2017 2016 Assets Cash $ 20,000 $ 30,000 $ 20.000 50.000 Marketable securities 35,000 30.000 330,000 230,000 150,000 Accounts receivable 325,000 285,000 250,000 450,000 725,000 580,000 Inventory Total current assets Net plant and equipment Total assets 1.169.000 720,000 550,000 $1,894,000 $ 1,300,000 $1,000,000 Liabilities and Shareholders' Equity Accounts payable.... $ 200,000 $ 225,000 $ 100,000 Accrued expenses. 300,000 100,000 100,000 Total current liabilities.. 500,000 325,000 200,000 Long-term liabilities.. 550,740 331,120 250.000 Total liabilities.. 1,050,740 656,120 450,000 Common stock.. 540,000 450,000 450,000 Retained earnings.. 303,260 193,880 100,000 Total shareholders' equity. 843,260 643,880 550,000 Total liabilities and shareholders' equity $1,894,000 $1,300,000 $ 1,000,000 Selected INDUSTRY Ratios 20XX 20XW 20XV Growth in sales. - 10.02% 9.98% 5.81% Profit margin.. 5.80% 5.75% 8.48% 8.24% 8.22% Return on assets (investment) Return on equity 10.10% 13.62% 13.26% 9.31% 9.50% 10.00 Receivables turnover. Average collection period.. 35.6 days 37.9 days 36.0 days 5.84x 5.62% 5.71% Inventory tumover. 2.20 2.66% 2.75% Capital asset turnover. 1.46% 1.42x 1.43x Total asset turnover. 2.15% 2.08% 2.10 Current ratio 1.10X 1.02x 1.05X Quick ratio. 40.10% 39.50% 38.00% Debt to total assets. 5.26% 5.20x 5.00 Times interest earned 3.97% 3.95% 3.85% Fixed charge coverage... 9.80% 9.706 Growth in earnings per share
