sob Buider Construction Company (BBCC) is a large firm for kichen applance manuacturers. Peral, the finance nanager of BBCC, submitted a justification to support the application for a short-term loan from he Queensville Interstate Bank (QIB) to finance increased sales. The consolidated income statement and balance sheet of BBCC are as follows. You are the loan officer at QIB responsible for determining whether BBCC's business is strong enough to be able to repay the loan. Using the attached Income Statement and Balance Sheet, accomplish the following: 1. Calculate the following profitability ratios for 2015 and 2016 , compare with the industry averages shown in parentheses, and indicate if the company is doing better or worse than the industry and whether the performance is improving or deteriorating in 2016 as compared to 2015. Calculate the EVA and MVA for BBCC, assuming that the firm's income tax rate is 40 percent, the weighted average rate of return expected by the suppliers of the firm's capital is 10 percent, and the market price of the firm's stock is $20. There are 1.2 million shares outstanding. a. Gross profit margin ( 50 percent) b. Operating profit margin ( 15 percent) c. Net profit margin ( 8 percent) d. Return on assets ( 10 percent) e. Return on equity ( 20 percent) 1. Current ratio (1.5) 9. Quick ratio (1.0) h. Debt to total asset ratio (0.5) 1. Times interest eamed (25) 1. Average collection period (45 days) k. Inventory tumover (8) 1. Total asset tumover (1.6) 2. Determine the sources and uses of funds and prepare a statement of cash flows for 2016. 3. Discuss the financial strengths and weaknesses of BBCC based on the financial condition as evident from the ratio analysis and the cash flow statement. 4. Which ratios should you analyze more critically before recommending granting of the loan and what is your recommendation? FINA 3320: Corporate Finance Project 1: Financial Statement Analysis BBCC Income Statement for 2015 and 3016 (thoneand dollars) BBCC Balance Sheet as of End of 2015 and 2016 (thousand dollars) (gross)$26,000$31,000 Less: Accumulated Depreciation - $10,000$13,000 Plant and Equipment (net) $16,000$18,000 FINA 3320 | Corporate Finance Land $1,000$1,000 Liabilities: \begin{tabular}{lll} Accounts Payable & $2,000 & $2,600 \\ Notes Payable & $3,000 & $3,300 \\ Accrued Expenses & $3,000 & $3,100 \\ Bonds Payable & $4,000 & $4,000 \\ \hline \end{tabular} Stockholders' Equity: Common Stock $4,000$4,000 Retained Earnings $14,000$16,620 BBCC Income.Statemont for note d dollars) BBCC Balance Sheet as of End of 2015 and 2016 (thousand dollars) (gross)$26,000$31,000 Less: Accumulated Depreciation - $10,000$13,000 Plant and Equipment (net) $16,000$18,000 FINA 3320 | Corporate Finance Land $1,000$1,000 Liabilities: AccountsPayableNotesPayableAccruedExpensesBondsPayable$2,000$3,000$3,000$4,000$2,600$3,300$3,100$4,000 Stockholders' Equity: Common Stock $4,000$4,000 Retained Earnings $14,000$16,620
