Module 2 Assignment

ABC Inc. 2017 sales are $1,200,000. Operating costs (excluding depreciation) are 75% of sales. Net fixed assets are $165,000. Depreciation amounted to 11% of net fixed assets. Interest expenses are $80,000. The tax bill must be calculated using the corporate income tax table in the text, and ABC Inc. paid 12% of net income in dividends.

Prepare ABC Inc.s income statement for 2017:

ABC Inc. Income Statement

2017

Sales

Operating costs (excluding depreciation)

EBITDA

Depreciation

EBIT

Interest Expense

EBT

Taxes***

Net Income

Common Dividends

Addition to Retained Earnings

Operating Cash Flow

***For Tax Rate use the corporate tax table in chapter 2 to determine the companys tax bill, average and marginal tax rates. Use the average tax rate for this portion of the income statement.

Average tax ________

Marginal tax ________

2. The financial statements for XYZ Inc. are shown below.

Income Statement and other info:

2017 2016

Year-end stock price $75.00 $70.00

# of shares 5000 3000

XYZ Inc. Income Statement

2017 2016

Sales 900,000 850,000

COGS 650,000 600,000

Gross Profit 250,000 250,000

Operating costs (excluding depreciation) 70,000 80,000

EDITDA 180,000 170,000

Depreciation 15,000 12,000

EBIT 165,000 158,000

Interest Expense 100,000 130,000

EBT 65,000 28,000

Taxes 19,500 8,400

Net Income 45,500 19,600

Common Dividends 4,550 4000

Addition to Retained Earnings 40,950 15,600

Balance Sheet

Assets 2017 2016

Cash and Cash Equivalents 40,000 30,000

Short term Investments 4,500 8,500

Accounts Receivable 156,000 180,000

Inventories 80,000 70,000

Total current assets 280,500 288,500

Net Fixed Assets 125,000 100,000

Total Assets 405,500 388,500

Liabilities and Equity 2017 2016

Accounts Payable 15,000 12,500

Accruals 18,500 14,000

Notes Payable 9,000 6,000

Total Current Liabilities 42,500 32,500

Long term debt 123,000 176,950

Total Liabilities 165,500 209,450

Common Stock 160,000 140,000

Retained Earnings 80,000 39,050

Total Common Equity 240,000 179,050

Total Liabilities and Equity 405,500 388,500

Find all of the ratios below:

2017 IA

Liquidity Ratios

Current Ratio 3.5

Quick Ratio 2

Asset Management Ratios

Inventory Turnover 25.39

Days Sales Outstanding 55.08

Total Assets Turnover 2.7

Debt Ratios

Debt Ratio 35%

TIE Ratio 6.5

Debt to Equity Ratio

Profitability Ratios

Profit Margin 12%

Return on Assets 13.5%

Return on Equity 15%

Market Ratios

EPS N/A

P/E ratio 14.78

Write a synopsis on how this company compares with the industry in each section of ratios.

Perform a DuPont analysis for XYZ Inc.

ROE = PM * TA Turnover * Equity Multiplier

2017

Explain the results in part c.