Pace e Bene Unlimited Consolidated Balance Sheet For the Years Ended December 31 (in millions) Cash and cash equivalents Accounts receivable, net Inventories Other current assets Total Current Assets 2,195 210 1,055 1,342 4,802 2,723 256 1,219 1,297 5,495 Property, Plant and Equipment, net Trademarks and Other Intangibles Goodwill and other Total Property, Plant and Equipment 1,002 2,675 8,599 12,276 1,025 2,718 8,771 12,514 Total Assets $ 17,078 $ 18,009 $ Current Liabilities: Accounts payable Product liability claims Taxes payable Other current liabilities Total current liabilities Long-term liabilities Long-term debt Other long-term debt Total long-term liabilities 179 $ 2,589 457 1,147 4,372 196 2,611 360 1,173 4,340 3,701 2,495 6,196 4,136 3,035 7,171 Equity 6,510 6,498 Total liabilities and shareholders' equity $ 17,078 $ 18,009 $ 1.65 Earnings per share Income from continuing operations Losses from discontinued operations Net Income 2.28 $ (0.37) 1.91 $ $ 1.65 2020 $35.48 583,043,872 2019 $33.48 582,848,102 Year-end stock price Number of outstanding shares, 12/31 Sales multiplier Free cash flow multiplier Earnings multiplier Accounts receivable turnover Inventory turnover Current ratio Quick ratio Cash flow ratio Free cash flow ratio Gross Margin % Return on assets (net book value) Return on equity Earnings per share INDUSTRY AVERAGE 1.2 8.5 13 30 5 0.85 0.47 0.33 0.15 52% 6.70% 18.10% $ 2.33 1. Evaluate Pace e Bene Unlimited(PeB) using financial ratio analysis. Because the calculation of some ratios requires the averaging of balance, assume that the balances in 2018 are the same as those in 2019. Compute the ratios for 2019 and 2020 and compare the trend to industry ratios. What makes Pel better/worse than industry and what should they do? liquidity - accounts receivable turnover, inventory turnover, current ratio, quick ratio, cash flow ratio, free cash flow ratio profitability - gross margin percentage, return on assets, return on equity 2. Provide the following business valuations Market Value Book Value of Equity Multiples - Earnings - Sales Free Cash Flow 3. What would be a reasonable valuation for Pace E Bene and WHY? 1) Compute the ratios for liquidity a. Accounts receivable T/o b. Inventory T/O C. Current Ratio d. Quick Ratio e. Cash flow ratio 2) 3) Compute the ratios for profitability a. Gross Margin Percentage b. ROA C. ROE Compute Business Valuations a. Book Value of Equity b. Market Value C. Multiples i. Earnings Multiple ii. Sales Multiple iii. Cash Flow Multiple What would be a reasonable valuation for Pace E Bene and WHY? Examine the trend for the 2019-2020 period Comment on the trend and offer whether the ratio is improving/declining/staying the same a. If declining, offer suggestions as to how Pace e Bene Unlimited can improve the ratios. Keep in mind that a change to one ratio may impact another. Use the five-step strategic decision model. The only alternative is to compute a limited financial statement analysis to assess the financial health of Pace e Bene Unlimited. 4) 5) 6) Pace e Bene Unlimited Consolidated Balance Sheet For the Years Ended December 31 (in millions) Cash and cash equivalents Accounts receivable, net Inventories Other current assets Total Current Assets 2,195 210 1,055 1,342 4,802 2,723 256 1,219 1,297 5,495 Property, Plant and Equipment, net Trademarks and Other Intangibles Goodwill and other Total Property, Plant and Equipment 1,002 2,675 8,599 12,276 1,025 2,718 8,771 12,514 Total Assets $ 17,078 $ 18,009 $ Current Liabilities: Accounts payable Product liability claims Taxes payable Other current liabilities Total current liabilities Long-term liabilities Long-term debt Other long-term debt Total long-term liabilities 179 $ 2,589 457 1,147 4,372 196 2,611 360 1,173 4,340 3,701 2,495 6,196 4,136 3,035 7,171 Equity 6,510 6,498 Total liabilities and shareholders' equity $ 17,078 $ 18,009 $ 1.65 Earnings per share Income from continuing operations Losses from discontinued operations Net Income 2.28 $ (0.37) 1.91 $ $ 1.65 2020 $35.48 583,043,872 2019 $33.48 582,848,102 Year-end stock price Number of outstanding shares, 12/31 Sales multiplier Free cash flow multiplier Earnings multiplier Accounts receivable turnover Inventory turnover Current ratio Quick ratio Cash flow ratio Free cash flow ratio Gross Margin % Return on assets (net book value) Return on equity Earnings per share INDUSTRY AVERAGE 1.2 8.5 13 30 5 0.85 0.47 0.33 0.15 52% 6.70% 18.10% $ 2.33 1. Evaluate Pace e Bene Unlimited(PeB) using financial ratio analysis. Because the calculation of some ratios requires the averaging of balance, assume that the balances in 2018 are the same as those in 2019. Compute the ratios for 2019 and 2020 and compare the trend to industry ratios. What makes Pel better/worse than industry and what should they do? liquidity - accounts receivable turnover, inventory turnover, current ratio, quick ratio, cash flow ratio, free cash flow ratio profitability - gross margin percentage, return on assets, return on equity 2. Provide the following business valuations Market Value Book Value of Equity Multiples - Earnings - Sales Free Cash Flow 3. What would be a reasonable valuation for Pace E Bene and WHY? 1) Compute the ratios for liquidity a. Accounts receivable T/o b. Inventory T/O C. Current Ratio d. Quick Ratio e. Cash flow ratio 2) 3) Compute the ratios for profitability a. Gross Margin Percentage b. ROA C. ROE Compute Business Valuations a. Book Value of Equity b. Market Value C. Multiples i. Earnings Multiple ii. Sales Multiple iii. Cash Flow Multiple What would be a reasonable valuation for Pace E Bene and WHY? Examine the trend for the 2019-2020 period Comment on the trend and offer whether the ratio is improving/declining/staying the same a. If declining, offer suggestions as to how Pace e Bene Unlimited can improve the ratios. Keep in mind that a change to one ratio may impact another. Use the five-step strategic decision model. The only alternative is to compute a limited financial statement analysis to assess the financial health of Pace e Bene Unlimited. 4) 5) 6)