Question
The last two years of financial statements for Blunt Industries are as follows: Blunt Industries Balance Sheet for December 31, 2015 and 2016 2015 2016
The last two years of financial statements for Blunt Industries are as follows:
| Blunt Industries | ||
| Balance Sheet for December 31, 2015 and 2016 | ||
| 2015 | 2016 | |
| Cash | $11,250.00 | $650.00 |
| Accounts receivable | $15,625.00 | $20,800.00 |
| Inventories | $36,250.00 | $59,150.00 |
| Total current assets | $63,125.00 | $80,600.00 |
| Land | $25,000.00 | $33,800.00 |
| Buildings and equipment | $87,500.00 | $130,000.00 |
| Less: Accumulated depreciation | -$35,000.00 | -$49,400.00 |
| Total fixed assets | $77,500.00 | $114,400.00 |
| Total assets | $140,625.00 | $195,000.00 |
| Accounts payable | $13,125.00 | $28,600.00 |
| Short-term bank notes | $21,250.00 | $61,100.00 |
| Total current liabilities | $34,375.00 | $89,700.00 |
| Long-term debt | $35,938.00 | $29,835.00 |
| Common stock | $39,375.00 | $40,950.00 |
| Retained earnings | $30,938.00 | $34,515.00 |
| Common Equity | $70,313.00 | $75,465.00 |
| Total debt and equity | $140,625.00 | $195,000.00 |
| Carver Industries | ||
| Income Statements | ||
| Years Ending December 31, 2012 and 2013 | ||
| Sales (all credit) | $187,500.00 | $400,000.00 |
| Cost of goods sold | -$112,500.00 | $240,000.00 |
| Gross profit | $75,000.00 | $160,000.00 |
| Operating expenses | ||
| Fixed cash operating expenses | -$31,500.00 | -$52,500.00 |
| Variable operating expenses | -$18,750.00 | -$40,000.00 |
| Depreciation | -$6,750.00 | -$25,000.00 |
| Total operating expenses | -$57,000.00 | -$117,500.00 |
| Earnings before interest and taxes | $18,000.00 | $42,500.00 |
| Interest expense | -$5,719.00 | -$9,094.00 |
| Earnings before taxes | $12,281.00 | $33,407.00 |
| Taxes | -$6,141.00 | -$16,703.00 |
| Net income | $6,141.00 | $16,703.00 |
| No. of shares in common Stock outstanding | 5,000.00 | |
| Market price per share | $15.00 |
a) Calcualte the following financial ratios for 2015 and 2016:
| 2015 | 2016 | Industry Averages | |
| Current ratio | 2.00 | ||
| Acid Test Ratio | 0.80 | ||
| Average collection period | 37.00 | ||
| Inventory turnover | 2.50 | ||
| Debt ratio | 58.00% | ||
| Times interest earned | 3.80 | ||
| Operating profit margin | 10.00% | ||
| Total asset turnover | 1.14 | ||
| Fixed asset turnover | 1.40 | ||
| Operating return on assets | 11.40% | ||
| Return on equity | 9.50% |
b) Evaluate the firm's financial position at the end of 2015 in terms of its liquidity, capital structure, asset management efficiency, and profitablity.
c) At the end of 2016, the firm has 5000 shares of common stock outstanding, selling for $15 each. What were the firm's (i) earnings per share, (ii) price-earnings ratio, and (iii) market-to-book ratio?
Calcualte the following financial ratios for 2015:
| Earnings per share |
| P-E ratio |
| Market to Book Ratio |
d) What observations can you make about the financial condition and performance of the firm from your answers to parts a through c?
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Mergers And Acquisitions Integration Handbook
Authors: Scott C. Whitaker
1st Edition
111800437X, 978-1118004371
