Part B

Directions: Click the case link above and use the information provided in Pacesetters, Inc., Part B, to answer this question: What is the trend in the EBITDA-to-total-debt-service and Funded debt-to-EBITDA ratios for the years 2012 and 2013? The EBITDA-to-Total-debt-service improved from 3.6 to 4.2 and Funded-debt-to-EBITDA improved slightly from 1.1 to 0.8. The EBITDA-to-Total-debt-service improved from 3.8 to 4.5 and the Funded-debt-to-EBITDA decreased from 1.1 to 1.0. The EBITDA-to-Total-debt-service increased from 3.8 to 4.5 and the Funded-debt-to-EBITDA decreased from 1.8 to 1.7. The EBITDA-to-Total-debt-service weakened from 3.7 to 2.4 and the Funded-debt-to-EBITDA weakened from 1.8 to 1.7. Balance Sheets (in $000s) As At December 31: 2011 20Y2 20Y3 2014 (Projected) $ ASSETS Current assets Cash Accounts receivable Inventory Prepaid expenses Other current assets Total current assets 300 720 1,250 151 200 2,621 369 910 1,384 120 90 2,873 198 1,129 1,640 208 112 3,287 250 1,219 1,900 163 112 3,644 Fixed assets 735 771 940 1,030 Other noncurrent assets 214 210 320 290 TOTAL ASSETS $ 3,570 $ 3,854 4,547 $ 4,964 302 359 200 LIABILITIES AND EQUITY Current liabilities Short-term debt Current portionLTD Accounts payable Accrued expenses Taxes payable Other current liabilities Total current liabilities 200 445 170 64 76 955 10 200 613 192 69 16 1,100 200 731 206 108 30 1,577 749 210 121 30 1,669 Long-term debt 1,392 1,192 992 792 Deferred taxes 54 58 60 65 Owner's equity Paid-in capital Retained earnings Total owners' equity 1,000 169 1,169 1,000 504 1,504 1,000 918 1,918 1,000 1,438 2,438 TOTAL LIABILITIES AND EQUITY $ 3,570 $ 3,854 $ 4,547 $ 4,964 Working investment $ 1,355 $ 1,489 $ 1,832 $ 2,160 Pacesetters, Inc. Income Statements (in $000s) Years Ended December 31: 20Y1 20Y2 20Y3 2014 (Projected) $ Sales Cost of goods sold Gross profit 7,500 5,320 2,180 9,000 6,280 2,720 $ 10,710 7,400 3,310 $ 12,900 8,920 3,980 Operating expenses Interest expense Income before taxes 1,227 143 810 1,559 126 1,035 1,916 130 1,264 2,208 142 1,630 446 Taxes Net income 324 486 564 700 750 880 589 $ Dividends 194 254 286 360 Retained earnings $ 292 $ 335 414 $ 520 Depreciation in COGS 75 $ 81 $ 103 $ 105 Pacesetters, Inc. Ratios and Indicators 2011 20Y2 20Y3 Balance Sheet Accounts receivable days on hand Inventory days on hand Sales/Net fixed assets Sales/Assets Income Statement Sales growth Gross profit margin Operating profit margin 35.0 days 85.8 days 10.2 2.1 36.9 days 80.4 days 11.7 2.4 38.5 days 80.9 days 11.4 2.4 n/a 29.1% 10.8% 20.0% 30.2% 11.5% 19.0% 30.9% 11.8% Directions: Click the case link above and use the information provided in Pacesetters, Inc., Part B, to answer this question: What is the trend in the EBITDA-to-total-debt-service and Funded debt-to-EBITDA ratios for the years 2012 and 2013? The EBITDA-to-Total-debt-service improved from 3.6 to 4.2 and Funded-debt-to-EBITDA improved slightly from 1.1 to 0.8. The EBITDA-to-Total-debt-service improved from 3.8 to 4.5 and the Funded-debt-to-EBITDA decreased from 1.1 to 1.0. The EBITDA-to-Total-debt-service increased from 3.8 to 4.5 and the Funded-debt-to-EBITDA decreased from 1.8 to 1.7. The EBITDA-to-Total-debt-service weakened from 3.7 to 2.4 and the Funded-debt-to-EBITDA weakened from 1.8 to 1.7. Balance Sheets (in $000s) As At December 31: 2011 20Y2 20Y3 2014 (Projected) $ ASSETS Current assets Cash Accounts receivable Inventory Prepaid expenses Other current assets Total current assets 300 720 1,250 151 200 2,621 369 910 1,384 120 90 2,873 198 1,129 1,640 208 112 3,287 250 1,219 1,900 163 112 3,644 Fixed assets 735 771 940 1,030 Other noncurrent assets 214 210 320 290 TOTAL ASSETS $ 3,570 $ 3,854 4,547 $ 4,964 302 359 200 LIABILITIES AND EQUITY Current liabilities Short-term debt Current portionLTD Accounts payable Accrued expenses Taxes payable Other current liabilities Total current liabilities 200 445 170 64 76 955 10 200 613 192 69 16 1,100 200 731 206 108 30 1,577 749 210 121 30 1,669 Long-term debt 1,392 1,192 992 792 Deferred taxes 54 58 60 65 Owner's equity Paid-in capital Retained earnings Total owners' equity 1,000 169 1,169 1,000 504 1,504 1,000 918 1,918 1,000 1,438 2,438 TOTAL LIABILITIES AND EQUITY $ 3,570 $ 3,854 $ 4,547 $ 4,964 Working investment $ 1,355 $ 1,489 $ 1,832 $ 2,160 Pacesetters, Inc. Income Statements (in $000s) Years Ended December 31: 20Y1 20Y2 20Y3 2014 (Projected) $ Sales Cost of goods sold Gross profit 7,500 5,320 2,180 9,000 6,280 2,720 $ 10,710 7,400 3,310 $ 12,900 8,920 3,980 Operating expenses Interest expense Income before taxes 1,227 143 810 1,559 126 1,035 1,916 130 1,264 2,208 142 1,630 446 Taxes Net income 324 486 564 700 750 880 589 $ Dividends 194 254 286 360 Retained earnings $ 292 $ 335 414 $ 520 Depreciation in COGS 75 $ 81 $ 103 $ 105 Pacesetters, Inc. Ratios and Indicators 2011 20Y2 20Y3 Balance Sheet Accounts receivable days on hand Inventory days on hand Sales/Net fixed assets Sales/Assets Income Statement Sales growth Gross profit margin Operating profit margin 35.0 days 85.8 days 10.2 2.1 36.9 days 80.4 days 11.7 2.4 38.5 days 80.9 days 11.4 2.4 n/a 29.1% 10.8% 20.0% 30.2% 11.5% 19.0% 30.9% 11.8%