Ratios and Financial Planning at East Coast Yachts Dan Ervin was recently hired by East Coast Yachts to assist the company with its short term financial planning and also to evaluate the company's financial performance Dan graduated from college five years ago with a finance degree, and he has been employed in the treasury department of a Fortune 500 company since then East Coast Yachts was founded 10 years ago by Larissa Warren The company's operations are located near Hilton Head Island, South Carolina, and the company is structured as an LLC The company has manufactured custom midsize, high performance yachts for clients over this period, and its products have received high reviews for safety and reliability The company's yachts afso have recently received the highest awand for customer satisfaction The yachts are primarily purchased by wealthy individuals for pleasure use Occasionally, a yacht is manufactured for purchase by a company for business purposes The custom yacht industry is fragnented with a number of manufacturers As with any indastry, there are market Ieaders, but the diverse nature of the industry ensures that no manufacturer dominates the market The competition in the market, as well as the product cost, Pensutes that attention to detail is a necessity For example, East Coast Yachts will spend 80 to 100 hours on hand buffing the stainless steel stem iron, which is the metal cap on the yacht's bow that conceivably could collide with a dock or another boat EAST COAST YACHTS 2022 Income Statement Balance Sheet as of December 31, 2022 Yacht Industry Ratios begin tabular lccc Lower Quartile Median Upper Quartile hline Current ratio 50 1 43 1 89 hline Quick ratio 21 38 62 hline Total asset turnover 68 85 1 38 hline Inventory turnover 6 85 9 15 16 13 hline Receivables turnover 6 27 11 81 21 45 hline Debt ratio 44 52 61 hline Debt equity ratio 79 1 08 1 56 hline Equity multiplier 1 79 2 08 2 56 hline Interest coverage 5 18 8 06 9 83 hline Profit margin 4 05 6 98 9 87 hline Return on assets 6 05 10 53 15 83 hline hline hline hline hline hline end tabular To get Dan started with his analyses, Larissa has provided the financial statements Dan has gathered the industry ratios for the yacht manufacturing industry 1 Calculate all of the ratios listed in the industry table for East Coast Yachts 2 Compare the performance of East Coast Yachts to the industry as a whole For each ratio, comment on why it might be viewed as positive or negative relative to the industry Suppose you create an inventory ratio calculated as inventory divided by current liabilities How do you interpret this ratio How does East Coast Yachts compare to the industry average 3 Calculate the sustainable growth rate of East Coast Yachts Calculate EFN and prepare pro forma income statements and balance sheets assuming growth at precisely this rate Recalculate the ratios in the previous question What do you observe 4 East Coast Yachts is unlikely to be willing to raise external equity capital, in part because the cwners don't want to dilute their existing ownership and control positions However East Coast Yachts is planning for a growth rate of 20 pereent next year What are your conclusions and recommendations about the feasibility of East Coast's expansion plans 5 Most assets can be increased as a percentage of sales For example, cash can be increased by any amount However, fixed assets often must be increased in speciffe amounts because it is impossible to buy part of a new plant or machine In this case, a company has a staircase of lumpy fixed cost structure Assume that East Coast Yachts is currently producing at 100 percent of capacity, As a result, to expand production, the company must set up an entirely new line at a cost of $25 million Calculate the new EFN with this assumption What does this imply about capacity utilization for East Coast Yachts next year Ratios and Financial Planning at East Coast Yachts Dan Ervin was recently hired by East Coast Yachts to assist the company with its short term financial planning and also to evaluate the company's financial performance Dan graduated from college five years ago with a finance degree, and he has been employed in the treasury department of a Fortune 500 company since then East Coast Yachts was founded 10 years ago by Larissa Warren The company's operations are located near Hilton Head Island, South Carolina, and the company is structured as an LLC The company has manufactured custom midsize, high performance yachts for clients over this period, and its products have received high reviews for safety and reliability The company's yachts afso have recently received the highest awand for customer satisfaction The yachts are primarily purchased by wealthy individuals for pleasure use Occasionally, a yacht is manufactured for purchase by a company for business purposes The custom yacht industry is fragnented with a number of manufacturers As with any indastry, there are market Ieaders, but the diverse nature of the industry ensures that no manufacturer dominates the market The competition in the market, as well as the product cost, Pensutes that attention to detail is a necessity For example, East Coast Yachts will spend 80 to 100 hours on hand buffing the stainless steel stem iron, which is the metal cap on the yacht's bow that conceivably could collide with a dock or another boat EAST COAST YACHTS 2022 Income Statement Balance Sheet as of December 31, 2022 Yacht Industry Ratios begin tabular lccc Lower Quartile Median Upper Quartile hline Current ratio 50 1 43 1 89 hline Quick ratio 21 38 62 hline Total asset turnover 68 85 1 38 hline Inventory turnover 6 85 9 15 16 13 hline Receivables turnover 6 27 11 81 21 45 hline Debt ratio 44 52 61 hline Debt equity ratio 79 1 08 1 56 hline Equity multiplier 1 79 2 08 2 56 hline Interest coverage 5 18 8 06 9 83 hline Profit margin 4 05 6 98 9 87 hline Return on assets 6 05 10 53 15 83 hline hline hline hline hline hline end tabular To get Dan started with his analyses, Larissa has provided the financial statements Dan has gathered the industry ratios for the yacht manufacturing industry 1 Calculate all of the ratios listed in the industry table for East Coast Yachts 2 Compare the performance of East Coast Yachts to the industry as a whole For each ratio, comment on why it might be viewed as positive or negative relative to the industry Suppose you create an inventory ratio calculated as inventory divided by current liabilities How do you interpret this ratio How does East Coast Yachts compare to the industry average 3 Calculate the sustainable growth rate of East Coast Yachts Calculate EFN and prepare pro forma income statements and balance sheets assuming growth at precisely this rate Recalculate the ratios in the previous question What do you observe 4 East Coast Yachts is unlikely to be willing to raise external equity capital, in part because the cwners don't want to dilute their existing ownership and control positions However East Coast Yachts is planning for a growth rate of 20 pereent next year What are your conclusions and recommendations about the feasibility of East Coast's expansion plans 5 Most assets can be increased as a percentage of sales For example, cash can be increased by any amount However, fixed assets often must be increased in speciffe amounts because it is impossible to buy part of a new plant or machine In this case, a company has a staircase of lumpy fixed cost structure Assume that East Coast Yachts is currently producing at 100 percent of capacity, As a result, to expand production, the company must set up an entirely new line at a cost of $25 million Calculate the new EFN with this assumption What does this imply about capacity utilization for East Coast Yachts next year

Question

Ratios and Financial Planning at East Coast Yachts Dan Ervin was recently hired by East Coast Yachts to assist the company with its short term financial planning and also to evaluate the company's financial performance  Dan graduated from college five years ago with a finance degree, and he has been employed in the treasury department of a Fortune 500 company since then  East Coast Yachts was founded 10 years ago by Larissa Warren  The company's operations are located near Hilton Head Island, South Carolina, and the company is structured as an LLC  The company has manufactured custom midsize, high performance yachts for clients over this period, and its products have received high reviews for safety and reliability  The company's yachts afso have recently received the highest awand for customer satisfaction  The yachts are primarily purchased by wealthy individuals for pleasure use  Occasionally, a yacht is manufactured for purchase by a company for business purposes  The custom yacht industry is fragnented with a number of manufacturers  As with any indastry, there are market Ieaders, but the diverse nature of the industry ensures that no manufacturer dominates the market  The competition in the market, as well as the product cost, Pensutes that attention to detail is a necessity  For example, East Coast Yachts will spend 80 to 100 hours on hand buffing the stainless steel stem iron, which is the metal cap on the yacht's bow that conceivably could collide with a dock or another boat  EAST COAST YACHTS 2022 Income Statement Balance Sheet as of December 31, 2022 Yacht Industry Ratios  begin tabular  lccc    Lower Quartile   Median   Upper Quartile     hline Current ratio    50   1 43   1 89     hline Quick ratio    21    38    62     hline Total asset turnover    68    85   1 38     hline Inventory turnover   6 85   9 15   16 13     hline Receivables turnover   6 27   11 81   21 45     hline Debt ratio    44    52    61     hline Debt equity ratio    79   1 08   1 56     hline Equity multiplier   1 79   2 08   2 56     hline Interest coverage   5 18   8 06   9 83     hline Profit margin   4 05    6 98    9 87      hline Return on assets   6 05    10 53    15 83      hline           hline           hline           hline           hline           hline  end tabular  To get Dan started with his analyses, Larissa has provided the financial statements  Dan has gathered the industry ratios for the yacht manufacturing industry  1  Calculate all of the ratios listed in the industry table for East Coast Yachts  2  Compare the performance of East Coast Yachts to the industry as a whole  For each ratio, comment on why it might be viewed as positive or negative relative to the industry  Suppose you create an inventory ratio calculated as inventory divided by current liabilities  How do you interpret this ratio  How does East Coast Yachts compare to the industry average  3  Calculate the sustainable growth rate of East Coast Yachts  Calculate EFN and prepare pro forma income statements and balance sheets assuming growth at precisely this rate  Recalculate the ratios in the previous question  What do you observe  4  East Coast Yachts is unlikely to be willing to raise external equity capital, in part because the cwners don't want to dilute their existing ownership and control positions  However  East Coast Yachts is planning for a growth rate of 20 pereent next year  What are your conclusions and recommendations about the feasibility of East Coast's expansion plans  5  Most assets can be increased as a percentage of sales  For example, cash can be increased by any amount  However, fixed assets often must be increased in speciffe amounts because it is impossible to buy part of a new plant or machine  In this case, a company has a  staircase  of  lumpy  fixed cost structure  Assume that East Coast Yachts is currently producing at 100 percent of capacity, As a result, to expand production, the company must set up an entirely new line at a cost of $25 million  Calculate the new EFN with this assumption  What does this imply about capacity utilization for East Coast Yachts next year  Ratios and Financial Planning at East Coast Yachts Dan Ervin was recently hired by East Coast Yachts to assist the company with its short term financial planning and also to evaluate the company's financial performance  Dan graduated from college five years ago with a finance degree, and he has been employed in the treasury department of a Fortune 500 company since then  East Coast Yachts was founded 10 years ago by Larissa Warren  The company's operations are located near Hilton Head Island, South Carolina, and the company is structured as an LLC  The company has manufactured custom midsize, high performance yachts for clients over this period, and its products have received high reviews for safety and reliability  The company's yachts afso have recently received the highest awand for customer satisfaction  The yachts are primarily purchased by wealthy individuals for pleasure use  Occasionally, a yacht is manufactured for purchase by a company for business purposes  The custom yacht industry is fragnented with a number of manufacturers  As with any indastry, there are market Ieaders, but the diverse nature of the industry ensures that no manufacturer dominates the market  The competition in the market, as well as the product cost, Pensutes that attention to detail is a necessity  For example, East Coast Yachts will spend 80 to 100 hours on hand buffing the stainless steel stem iron, which is the metal cap on the yacht's bow that conceivably could collide with a dock or another boat  EAST COAST YACHTS 2022 Income Statement Balance Sheet as of December 31, 2022 Yacht Industry Ratios  begin tabular  lccc    Lower Quartile   Median   Upper Quartile     hline Current ratio    50   1 43   1 89     hline Quick ratio    21    38    62     hline Total asset turnover    68    85   1 38     hline Inventory turnover   6 85   9 15   16 13     hline Receivables turnover   6 27   11 81   21 45     hline Debt ratio    44    52    61     hline Debt equity ratio    79   1 08   1 56     hline Equity multiplier   1 79   2 08   2 56     hline Interest coverage   5 18   8 06   9 83     hline Profit margin   4 05    6 98    9 87      hline Return on assets   6 05    10 53    15 83      hline           hline           hline           hline           hline           hline  end tabular  To get Dan started with his analyses, Larissa has provided the financial statements  Dan has gathered the industry ratios for the yacht manufacturing industry  1  Calculate all of the ratios listed in the industry table for East Coast Yachts  2  Compare the performance of East Coast Yachts to the industry as a whole  For each ratio, comment on why it might be viewed as positive or negative relative to the industry  Suppose you create an inventory ratio calculated as inventory divided by current liabilities  How do you interpret this ratio  How does East Coast Yachts compare to the industry average  3  Calculate the sustainable growth rate of East Coast Yachts  Calculate EFN and prepare pro forma income statements and balance sheets assuming growth at precisely this rate  Recalculate the ratios in the previous question  What do you observe  4  East Coast Yachts is unlikely to be willing to raise external equity capital, in part because the cwners don't want to dilute their existing ownership and control positions  However  East Coast Yachts is planning for a growth rate of 20 pereent next year  What are your conclusions and recommendations about the feasibility of East Coast's expansion plans  5  Most assets can be increased as a percentage of sales  For example, cash can be increased by any amount  However, fixed assets often must be increased in speciffe amounts because it is impossible to buy part of a new plant or machine  In this case, a company has a  staircase  of  lumpy  fixed cost structure  Assume that East Coast Yachts is currently producing at 100 percent of capacity, As a result, to expand production, the company must set up an entirely new line at a cost of $25 million  Calculate the new EFN with this assumption  What does this imply about capacity utilization for East Coast Yachts next year

Accepted Answer

The Answer is in the image, click to view ...

Question

Ratios and Financial Planning at East Coast Yachts Dan Ervin was recently hired by East Coast Yachts to assist the company with its short-term financial

Step by Step Solution

Step: 1

Get Instant Access to Expert-Tailored Solutions

Step: 2

Step: 3

Ace Your Homework with AI

Recommended Textbook for

Financial Analysis With Microsoft Excel

Students also viewed these Finance questions

Question

Question

Question

Question

Question

Question

Question

Question

Question

Question

Question

Question

Question

Question