Part I. Financial Statement Analysis In order to bring you up to speed with Perez Construction's current situation, you have been asked to assess Perez Construction's financial performance during 2020 and its financial position at year-end 2020. To complete this assignment, you have gathered the firm's 2020 financial statements (below). In addition, your assistant obtained the firm's ratio values for 2018 and 2019, along with the 2020 industry average ratios. During the year, lease payments were $50,000, while sinking fund payments were $25,000. To Do: 1. Calculate the firm's 2020 financial ratios, and then fill in the table given at the bottom of this section. (10 points; 1 point each) (ASSUME a 365-day year) 2. In Executive Summary evaluate the firm's strength and weaknesses. Break your analysis down into evaluations of the firm's liquidity, asset management, debt, profitability, and market ratios. (6 points - one for each category tied to trends and comparison to industry, plus one for an overall synopsis.) Perez Construction Income Statement Year Ending December 31, 2020 Sales Revenue Less Cost of Goods Sold $6,075,000 -4.000 200 Gross Profit $2,074.800 Less: Operating Expenses Selling Expense General and Administrative $650,000 $326,000 $ 50,000 Lease payments Depreciation $152.000 S1.178.000 S 896,800 Total Operating Expenses Operating Profit Less: Interest Expenses Net profit before taxes Less: Taxes 99 500 $ 797,300 28.920 $ 478,380 Net Profit after taxes Earnings per share: 54.78 Dividends per share: 54,58 Balance Sheets December 31 2020 Assets 2019 Current assets $ 25.000 $ 24.100 Accounts receivable 305.556 763.900 Inventories Total current assets 700025 SLSILISI $2.597.819 23.445 $1.551.445 $1,691,707 MON Ciras fixed assets (at cost) Lexe: Accumulated depreciation Net fixed assets Totalsts 1.993319 SI 525.000 14.3.2012 $2.805.152 $ 230,000 311.000 $400.450 370,000 100.212 $871.352 75.00 $ 616.000 Liabilities and Stockholders' Equity Current liabilities Accounts payable Notes payable Accruals Total current liabilities Long-term debe Total liabilities Stockholders' equity Common stock (100,000 shares at S4 pary Paid-in capital in excess of par value Retained carning SL565 200 $2.281.200 $1.571.382 400.000 643 00 643.80 31.123.0 Total stockholders' equity $1.343 A Total liabilities and sockholders' equity 52.325.000 Perez Construction's 100.000 shares of common stock closed at a price of 554.00 per share. $2.895.152 Perez Construction Historical & Industry Average Ratios Ratio Actual 2018 Actual 2019 Industry Average 2020 Actual 2020 1.7 1.8 1.5 1.0 0.9 1.2 5.0 10,2 5.2 50.7 days 46 days 55.8 days 52.8% 45.8% 24.5% a. Current ratio b. Quick ratio c. Inventory turnover (times) . Days sales outstanding (DSO) f. Debt-to-assets ratio 4. Times interest carned ratio h. Net profit margin i. Return on common equity (ROE) 1. Price/carnings (P/E) ratio k. Market value/book (M/B) ratio 10.2 10,9 12.5 6.0% 7.2% 1.2% 21.1% 26.3% 17.9% 9.8 10.2 10,1 3.2 3.36 3.5
