QUESTION 6
Go to the quiz spreadsheet and compute the sustainable growth rate for 2021. Round to the second decimal place. Do not include the percent sign and state your answer to the nearest basis point. For example, 12.34% would be written as 12.34
B26 Financial Statement Analysis - Ratios Actual Financial Statements 2012 2013 Forecasts (I am providing this to you) 2018 2019 2014 2015 2016 2017 2020 2021 2022 2023 Liquidity and Operating Efficiency Ratios Liquidity Current Ratio Quick Asset Ratio 1.20 1.30 1.60 1.80 2.00 Operating efficiency Inventory Tumover Accounts Receivable Turnover Working Capital Turnover 6.64 9.86 25.00 6.08 10.43 20.00 5.21 11.06 15.00 4.56 11.77 12.00 4.05 12.17 10.00 Days Supply inventory Days Sales Outstanding Cash to Cash Cycle 55.00 37.00 92.00 60.00 35.00 95.00 70.00 33.00 103.00 80.00 31.00 111.00 90.00 30.00 120.00 Profitability Ratlos Business Profitability Sales Growth (total revenues) Gross Profit Margin (no services) Operating Profit Marin Net Profit Margin 26.00% 5.45% 3.00% 2.50X 18.00% 5.30% 4.00% 3.00% % 20.00 5.15% 6.00% 5.00% 12.00% 5.00% 8.00% 5.50% 6.00% 4.85% 10.00% 6.00% Investment Profitability Return on Assets (lapsed) Asset Turnover (Larged) Net Profit Margin Retum on Assets (DuPont) 2.20 2.30 2.50 2.60 2.70 2.80 Return on Equity (lagged) Retum on Assets (lagged) Equity Multiplier - 1 + Debt to Equity (Laged) Return on Equity (DuPont) Capital Structure and Credit Ratios Debt to Equity (total liability/equity Times Interest Earned Debt Service Margin (Lagged CMLTD) 3.60 7.35 3.00 5.28 2.60 3.25 2.20 4.86 2.00 6.64 2.00 5.84 14.50% 16.00% 20.00% 24.00% 26.00% Growth Potential Dividend Payout Rate Internal Growth Rate = ROA Sustainable Growth Rate - ROE ** Current Assets/Total Assets 45.00% 44.00% 43.00% 42.50% % 42.11% 1 2 Balance Sheet 3 4 Actual Financial Statements 2012 2013 Forecasts (you do this) 2018 5 2014 2015 2016 2017 2019 2020 2021 2022 2023 $8,084 3,364 6,031 3,817 21,296 $8,658 $14,557 $15,890 $19,334 3,789 2,859 3,918 6,647 7,411 8,299 10,243 11,461 4,767 5,612 6,423 8,339 24,625 31,327 36,474 45,781 $20,522 10,464 16,047 13,164 60,197 7,060 10,949 16,967 21,838 29,114 48,866 2,552 2,655 3,319 3,759 3,784 13,350 1,647 1,930 2,892 3,373 4,723 8,897 11,259 15,534 23,178 28,970 37,621 71,113 $32,555 $40,159 $54,505 $65,444 $83,402 $131,310 6 ASSETS 7 Current assets: 8 Cash and cash equivalents 9 Marketable securities 10 Inventories 11 Accounts receivable, net and other 12 Total current assets 13 Non-Current assets: 14 Property and equipment, net 15 Goodwill 16 Other assets 17 Total non-current assets 18 Total assets 19 20 LIABILMES AND STOCKHOLDERS? EQUITY 21 Current liabilities: 22 Accounts payable 23 Accrued expenses and other 24 Current Maturities on Long-Term Debt 25 Notes Payable - Current 25 Total current liabilities 27 Non-Current liabilities: 28 Long-term debt 29 Other long-term liabilities 30 Commitments and contingencies (Note 7) Total non-current liabilities 32 Total Liabilities 33 34 Stockholders' equity: 35 Authorized shares - 5,000 35 Issued shares - 500 and 507 37 Outstanding shares - 477 and 484 38 Treasury stock, at cost 39 Additional paid-in capital 40 Accumulated other comprehensive loss 41 Retained earnings 42 Total stockholders' equity 43 Total liabilities and stockholders? equity 44 $13,318 $15,133 $16,459 $20,397 $25,309 4,892 6,688 9,807 10,384 13,739 579 753 1,520 238 1,056 792 1,159 1,823 4,768 19,581 23,733 29,609 34,137 44,872 $34,616 18,170 100 5,097 57,983 3,118 3,084 1,698 3,191 3,489 8,265 1,881 4,009 14,155 43,764 8,235 5,679 4,009 17,923 52,060 7,694 5,138 6,413 19,245 64,117 24,743 6,728 14,147 45,618 103,601 4,782 24,363 6,680 30,413 5 5 5 5 5 5 5 (1,837) (1,837) (1,837) (1,837) (1,837) (1,837) 8,347 9,573 11,135 13,394 17,186 21,389 (239) (185) (511) (723) (985) (484) 1,916 2,190 1,949 2,545 4,916 8,636 8.192 9,746 10,741 13,384 19,285 27,709 $32,555 $40,159 $54,505 $65,444 $83,402 $131,310 45 Income Statement Forecasts (you do this) 2018 2019 2020 2021 2022 2023 Actual Financial Statements 2012 2013 51,733.00 60,903.00 9,360.00 13,549.00 61,093.00 74,452.00 2014 70,080.00 18,908.00 88,988.00 2015 79,268.00 27,738.00 107,006.00 2016 94,665.00 41,322.00 135,987.00 2017 118,573.00 59,293.00 177,866.00 Net product sales Net service sales Total net sales Operating expenses: Cost of sales Gross Profit Fulfillment Marketing Technology and content General and administrative Other operating expense, net Total operating expenses Operating income Interest income Interest expense Other income (expense), net Total non-operating income (expense) Income before income taxes Provision for income taxes Equity-method investment activity, net of tax 45,971.00 5,762.00 6,419.00 2,408.00 4,564.00 896.00 159.00 14,446.00 676.00 40.00 (92.00) (80.00) (132.00) 544.00 (428.00) (155.00) 54,181.00 6,722.00 8,585.00 3,133.00 6,565.00 1,129.00 114.00 19,526.00 745.00 38.00 (141.00) (136.00) (239.00) 506.00 (161.00) (71.00) 62,752.00 7,328.00 10,766.00 4,332.00 9,275.00 1,552.00 133.00 26,058.00 178.00 39.00 (210.00) (118.00) (289.00) (111.00) (167.00) 37.00 71,651.00 7,617.00 13,410.00 5,254.00 12,540.00 1,747.00 171.00 33,122.00 2,233.00 50.00 (459.00) (256.00) (665.00) 1,568.00 (950.00) (22.00) 88,265.00 6,400.00 17,619.00 7,233.00 16,085.00 2,432.00 167.00 43,536.00 4,186.00 100.00 (484.00) 90.00 (294.00) 3,892.00 (1,425.00) (96.00) 111,934.00 6,639.00 25,249.00 10,069.00 22,620.00 3,674.00 214.00 61,826.00 4,106.00 202.00 (848.00) 346.00 (300.00) 3,806.00 (769.00) (4.00) Net income (39.00) 274.00 (241.00) 596.00 2,371.00 3,033.00 1 2 3 Forecasts (you do this) 2018 2019 4 Actual Financial Statements 2012 2013 2014 2015 2016 $5,269 $8,084 $8,658 $14,557 $15,890 2020 2021 2022 2023 2017 $19,334 (39) 274 (241) 596 2,371 3,033 2,159 3,253 4,746 6,281 8,116 11,478 2,119 155 2,975 160 4,215 202 833 154 ) 19) 253 (265) (429) 1,134 114 1 166 (156) (78) 1,497 129 (3) 62 (316) (6) 18 250 81 (20) (246) (292) (29) 19 23 24 (999) (861) 2,070 1,038 1,796 (1,521) 4,180 (1,410) (846) 1,888 736 2,691 (2,292) 5,475 5 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6 7 OPERATING ACTIVITIES: 3 Net income 9 Adjustments to reconcile net income to 10 net cash from operating activities: 11 Depreciation of property and equipment, 12 including internal-use software and website 13 development, and other amortization, 14 Including capitalized content costs 15 Stock-based compensation 15 Other operating expense, net 17 Losses (gains) on sales of marketable securities, Other expense (income), net Deferred income taxes 20 Excess tax benefits from stock-based compensation 21 Changes in operating assets and liabilities: 22 Inventories Accounts receivable, net and other Accounts payable 25 Accrued expenses and other 26 Unearned revenue 27 Amortization of previously unearned revenue 28 Net cash provided by (used in) operating activities 29 30 INVESTING ACTIVITIES: 31 Purchases of property and equipment, including 32 internal-use software and website development 33 Proceeds from property and equipment incentives 34 Acquisitions, net of cash acquired, and other 35 36 Sales and maturities of marketable securities 37 Purchases of marketable securities 38 Net cash provided by (used in) investing activities 39 40 FINANCING ACTIVITIES: 41 Excess tax benefits from stock-based compensation 42 Common stock repurchased 13 Proceeds from long-term debt and other Dividends Paid to Common Shareholders 45 other stuff 45 Principal repayments of finance lease oblgations 47 48 Net cash provided by (used in) financing Activities (1,193) (1,039) 1,759 706 4,433 (3,692) 6,842 (2,187) (1,755) 4,294 913 1,292 (1,426) (3,367) 5,030 1,724 1,955 (3,583) (4,786) 7,175 283 738 12,039 17,272 18,434 (3,785) (3,444) (4,893) (5,387) (7,804) (11,955) 798 (795) 1,067 (116) (745) (312) 1,897 (13,972) (979) 3,025 4,237 (3,302) (3,595) 2,306 (2,826) (4,276) 3,349 (2,542) (5,065) (4,091) 4,733 (7,756) (9,876) 9,988 (13,777) (27,819) (6,450) 78 6 429 (960) - 3,378 (82) 394 (231) 6,359 (513) 353 (1,652) 621 (354) 16,231 (1,372) (20) (5) (135) (121) (147) (200) 2,259 (539) 4,432 (3,882) (3,740) 9,860 49 (29) (86) (310) (374) (212) 713 50 Foreign currency effect on cash and cash equivalents 51 52 B26 Financial Statement Analysis - Ratios Actual Financial Statements 2012 2013 Forecasts (I am providing this to you) 2018 2019 2014 2015 2016 2017 2020 2021 2022 2023 Liquidity and Operating Efficiency Ratios Liquidity Current Ratio Quick Asset Ratio 1.20 1.30 1.60 1.80 2.00 Operating efficiency Inventory Tumover Accounts Receivable Turnover Working Capital Turnover 6.64 9.86 25.00 6.08 10.43 20.00 5.21 11.06 15.00 4.56 11.77 12.00 4.05 12.17 10.00 Days Supply inventory Days Sales Outstanding Cash to Cash Cycle 55.00 37.00 92.00 60.00 35.00 95.00 70.00 33.00 103.00 80.00 31.00 111.00 90.00 30.00 120.00 Profitability Ratlos Business Profitability Sales Growth (total revenues) Gross Profit Margin (no services) Operating Profit Marin Net Profit Margin 26.00% 5.45% 3.00% 2.50X 18.00% 5.30% 4.00% 3.00% % 20.00 5.15% 6.00% 5.00% 12.00% 5.00% 8.00% 5.50% 6.00% 4.85% 10.00% 6.00% Investment Profitability Return on Assets (lapsed) Asset Turnover (Larged) Net Profit Margin Retum on Assets (DuPont) 2.20 2.30 2.50 2.60 2.70 2.80 Return on Equity (lagged) Retum on Assets (lagged) Equity Multiplier - 1 + Debt to Equity (Laged) Return on Equity (DuPont) Capital Structure and Credit Ratios Debt to Equity (total liability/equity Times Interest Earned Debt Service Margin (Lagged CMLTD) 3.60 7.35 3.00 5.28 2.60 3.25 2.20 4.86 2.00 6.64 2.00 5.84 14.50% 16.00% 20.00% 24.00% 26.00% Growth Potential Dividend Payout Rate Internal Growth Rate = ROA Sustainable Growth Rate - ROE ** Current Assets/Total Assets 45.00% 44.00% 43.00% 42.50% % 42.11% 1 2 Balance Sheet 3 4 Actual Financial Statements 2012 2013 Forecasts (you do this) 2018 5 2014 2015 2016 2017 2019 2020 2021 2022 2023 $8,084 3,364 6,031 3,817 21,296 $8,658 $14,557 $15,890 $19,334 3,789 2,859 3,918 6,647 7,411 8,299 10,243 11,461 4,767 5,612 6,423 8,339 24,625 31,327 36,474 45,781 $20,522 10,464 16,047 13,164 60,197 7,060 10,949 16,967 21,838 29,114 48,866 2,552 2,655 3,319 3,759 3,784 13,350 1,647 1,930 2,892 3,373 4,723 8,897 11,259 15,534 23,178 28,970 37,621 71,113 $32,555 $40,159 $54,505 $65,444 $83,402 $131,310 6 ASSETS 7 Current assets: 8 Cash and cash equivalents 9 Marketable securities 10 Inventories 11 Accounts receivable, net and other 12 Total current assets 13 Non-Current assets: 14 Property and equipment, net 15 Goodwill 16 Other assets 17 Total non-current assets 18 Total assets 19 20 LIABILMES AND STOCKHOLDERS? EQUITY 21 Current liabilities: 22 Accounts payable 23 Accrued expenses and other 24 Current Maturities on Long-Term Debt 25 Notes Payable - Current 25 Total current liabilities 27 Non-Current liabilities: 28 Long-term debt 29 Other long-term liabilities 30 Commitments and contingencies (Note 7) Total non-current liabilities 32 Total Liabilities 33 34 Stockholders' equity: 35 Authorized shares - 5,000 35 Issued shares - 500 and 507 37 Outstanding shares - 477 and 484 38 Treasury stock, at cost 39 Additional paid-in capital 40 Accumulated other comprehensive loss 41 Retained earnings 42 Total stockholders' equity 43 Total liabilities and stockholders? equity 44 $13,318 $15,133 $16,459 $20,397 $25,309 4,892 6,688 9,807 10,384 13,739 579 753 1,520 238 1,056 792 1,159 1,823 4,768 19,581 23,733 29,609 34,137 44,872 $34,616 18,170 100 5,097 57,983 3,118 3,084 1,698 3,191 3,489 8,265 1,881 4,009 14,155 43,764 8,235 5,679 4,009 17,923 52,060 7,694 5,138 6,413 19,245 64,117 24,743 6,728 14,147 45,618 103,601 4,782 24,363 6,680 30,413 5 5 5 5 5 5 5 (1,837) (1,837) (1,837) (1,837) (1,837) (1,837) 8,347 9,573 11,135 13,394 17,186 21,389 (239) (185) (511) (723) (985) (484) 1,916 2,190 1,949 2,545 4,916 8,636 8.192 9,746 10,741 13,384 19,285 27,709 $32,555 $40,159 $54,505 $65,444 $83,402 $131,310 45 Income Statement Forecasts (you do this) 2018 2019 2020 2021 2022 2023 Actual Financial Statements 2012 2013 51,733.00 60,903.00 9,360.00 13,549.00 61,093.00 74,452.00 2014 70,080.00 18,908.00 88,988.00 2015 79,268.00 27,738.00 107,006.00 2016 94,665.00 41,322.00 135,987.00 2017 118,573.00 59,293.00 177,866.00 Net product sales Net service sales Total net sales Operating expenses: Cost of sales Gross Profit Fulfillment Marketing Technology and content General and administrative Other operating expense, net Total operating expenses Operating income Interest income Interest expense Other income (expense), net Total non-operating income (expense) Income before income taxes Provision for income taxes Equity-method investment activity, net of tax 45,971.00 5,762.00 6,419.00 2,408.00 4,564.00 896.00 159.00 14,446.00 676.00 40.00 (92.00) (80.00) (132.00) 544.00 (428.00) (155.00) 54,181.00 6,722.00 8,585.00 3,133.00 6,565.00 1,129.00 114.00 19,526.00 745.00 38.00 (141.00) (136.00) (239.00) 506.00 (161.00) (71.00) 62,752.00 7,328.00 10,766.00 4,332.00 9,275.00 1,552.00 133.00 26,058.00 178.00 39.00 (210.00) (118.00) (289.00) (111.00) (167.00) 37.00 71,651.00 7,617.00 13,410.00 5,254.00 12,540.00 1,747.00 171.00 33,122.00 2,233.00 50.00 (459.00) (256.00) (665.00) 1,568.00 (950.00) (22.00) 88,265.00 6,400.00 17,619.00 7,233.00 16,085.00 2,432.00 167.00 43,536.00 4,186.00 100.00 (484.00) 90.00 (294.00) 3,892.00 (1,425.00) (96.00) 111,934.00 6,639.00 25,249.00 10,069.00 22,620.00 3,674.00 214.00 61,826.00 4,106.00 202.00 (848.00) 346.00 (300.00) 3,806.00 (769.00) (4.00) Net income (39.00) 274.00 (241.00) 596.00 2,371.00 3,033.00 1 2 3 Forecasts (you do this) 2018 2019 4 Actual Financial Statements 2012 2013 2014 2015 2016 $5,269 $8,084 $8,658 $14,557 $15,890 2020 2021 2022 2023 2017 $19,334 (39) 274 (241) 596 2,371 3,033 2,159 3,253 4,746 6,281 8,116 11,478 2,119 155 2,975 160 4,215 202 833 154 ) 19) 253 (265) (429) 1,134 114 1 166 (156) (78) 1,497 129 (3) 62 (316) (6) 18 250 81 (20) (246) (292) (29) 19 23 24 (999) (861) 2,070 1,038 1,796 (1,521) 4,180 (1,410) (846) 1,888 736 2,691 (2,292) 5,475 5 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6 7 OPERATING ACTIVITIES: 3 Net income 9 Adjustments to reconcile net income to 10 net cash from operating activities: 11 Depreciation of property and equipment, 12 including internal-use software and website 13 development, and other amortization, 14 Including capitalized content costs 15 Stock-based compensation 15 Other operating expense, net 17 Losses (gains) on sales of marketable securities, Other expense (income), net Deferred income taxes 20 Excess tax benefits from stock-based compensation 21 Changes in operating assets and liabilities: 22 Inventories Accounts receivable, net and other Accounts payable 25 Accrued expenses and other 26 Unearned revenue 27 Amortization of previously unearned revenue 28 Net cash provided by (used in) operating activities 29 30 INVESTING ACTIVITIES: 31 Purchases of property and equipment, including 32 internal-use software and website development 33 Proceeds from property and equipment incentives 34 Acquisitions, net of cash acquired, and other 35 36 Sales and maturities of marketable securities 37 Purchases of marketable securities 38 Net cash provided by (used in) investing activities 39 40 FINANCING ACTIVITIES: 41 Excess tax benefits from stock-based compensation 42 Common stock repurchased 13 Proceeds from long-term debt and other Dividends Paid to Common Shareholders 45 other stuff 45 Principal repayments of finance lease oblgations 47 48 Net cash provided by (used in) financing Activities (1,193) (1,039) 1,759 706 4,433 (3,692) 6,842 (2,187) (1,755) 4,294 913 1,292 (1,426) (3,367) 5,030 1,724 1,955 (3,583) (4,786) 7,175 283 738 12,039 17,272 18,434 (3,785) (3,444) (4,893) (5,387) (7,804) (11,955) 798 (795) 1,067 (116) (745) (312) 1,897 (13,972) (979) 3,025 4,237 (3,302) (3,595) 2,306 (2,826) (4,276) 3,349 (2,542) (5,065) (4,091) 4,733 (7,756) (9,876) 9,988 (13,777) (27,819) (6,450) 78 6 429 (960) - 3,378 (82) 394 (231) 6,359 (513) 353 (1,652) 621 (354) 16,231 (1,372) (20) (5) (135) (121) (147) (200) 2,259 (539) 4,432 (3,882) (3,740) 9,860 49 (29) (86) (310) (374) (212) 713 50 Foreign currency effect on cash and cash equivalents 51 52
