In 1969, Tom Warren founded East Coast Yachts. The company has manufactured custom mid-size, high-performance yachts for clients and its products have received high reviews for safety and reliability. The yachts are primarily purchased by wealthy individuals for pleasure use. The company's operations are located near Hilton Head Island, South Carolina, and the company is now structured as a corporation following initially being structured as a sole proprietorship.

The custom yacht industry is fragmented with a number of manufacturers. As with many industries, there are market leaders, but the diverse nature of the industry ensures that no manufacturer dominates the market. The competition in the market and the overall cost of a well-built yacht ensures that attention to product detail and quality is of upmost importance.

Several years ago, Tom Warren retired and turned the day-to-day operations of the company over to his daughter, Larissa. Dan Ervin was recently hired by East Coast Yachts to assist the company with its financial planning and also to evaluate the company's financial performance. Dan graduated with a MBA 5 years ago and was most recently employed in the treasury department of a Fortune 500 company.

Larissa wants Dan to find out how East Coast Yachts is performing relative to its peers. Additionally, she wants to find out the future financing necessary to fund the company's growth. In the past, East Coast Yachts experienced difficulty in financing its growth plans, in large part because of poor planning. Larissa hoped that Dan would be able to estimate the amount of capital the company would have to raise next year so that East Coast Yachts would be better prepared to fund its expansion plans.

To get Dan started with his analyses, Larissa provided the following financial statements. Dan then gathered the industry ratios for the yacht manufacturing industry.

Answer the questions below. As an aid, a spreadsheet file with the financial statements and industry ratios presented above is available on the D2L website for your use. The file is entitled Assignment 2-Data.

1) Calculate all of the ratios listed in the industry ratios table for East Coast Yachts.

2) For each of East Coast Yachts' ratios, comment on why it might be viewed as a positive or negative relative to the industry. Discuss the overall performance of East Coast Yachts relative to its industry.

3) Calculate the sustainable growth rate for East Coast Yachts using the formula below. (JUST ANSWER THIS QUESTION).

Sustainable Growth = ROE x b / 1- ROE x b

2019 Income Statement Sales Cost of goods sold Selling, general, and administrative expenses Depreciation expense EBIT. Interest expense EBT Taxes Net income Dividends Retained earnings $ 705,947,000 547,154,000 60,699,000 23,044,000 75,050,000 12,732,000 62,318,000 18,695,400 43,622,600 21,811,300 21,811,300 60,283,000 16,523,000 21,850,000 98,656,000 Current assets Cash and equivalents Accounts receivable Inventory Other Total current assets Fixed assets Property, plant, and equipment Less: accumulated depreciation Net property, plant, and equipment Intangible assets and other assets Total fixed assets 2019 Balance Sheet Current liabilities 10,118,000 Accounts payable 42,402,000 Accrued expenses 45,614,000 Note payable 129,000 Total current liabilities 98,263,000 Long-term debt 555,509,000 Total long-term liabilities (100,970,000) 454,539,000 Stockholders' equity 89,252,000 Preferred stock 543,791,000 Common stock Capital surplus Accumulated retained earnings Less treasury stock Total equity 275,973,000 275,973,000 $ $ $ $ 12,220,000 61,543,000 86,642,000 138,540,000 (31,520,000) 267,425,000 Total assets $ 642,054,000 Total liabilities and stockholders' equity $ 642,054,000 lile Upper quartile 1.97 Current ratio Quick ratio Total asset turnover Inventory turnover Receivables turnover Debt ratio Debt-equity ratio Equity multiplier Interest coverage Profit margin Return on assets Return on equity Industry Ratios Lower quartile Median 0.86 1.51 0.43 0.75 1.10 1.27 12.18 14.38 10.25 17.65 0.32 0.83 1.13 1.83 2.13 5.72 8.21 5.02% 7.48% 7.05% 10.67% 14.06% 19.32% 0.56 1.01 1.46 16.43 22.43 0.61 1.44 2.44 10.83 9.05% 14.16% 26.41%