Yacht Industry Ratios EAST COAST YACHTS 2015 Income Statement Lower Mediar pper Current ratio Quick ratio Total asset turnover Inventory turnover $210,900,000 148,600,000 25,192,000 6,879,000 $ 30,229.000 1.89 Cost of goads sold Other expenses Earnings before interest and taxes (EBIT) 11.8 Debt ratio Taxable income Taxes (40%) Nct income $ 26,438,000 0.575.200 $15,862,800 Equity multipier Interest coverage Profit margin Return on assets Return on equity 6.98% Dividends Add to RE $ 4,759,30 $11,103.499 6.05% 15 83% 16.54% I. 2. Compare the performance of East Coast Yachts to the industry as a whole. For each EAST COAST YACHTS Balance Sheet as of December 31, 20I5 Calculate all of the ratios listed in the industry table for East Coast Yachts. 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 Liabilities & Equity Current labilities $ 6,977,700 14.342,600 21,320,300 $ 3,2B5,600 Acournts payable 5,910,800 Notes payable 6.627.300 Accounts receivable 3. Calculate the sustainable growth rate of Fast Coast Yachts. Calculale external funds needed (EFN) and prepare pro forma income statements and balance sheets assuming growth at precisely this rale. Recalculale the ratios in the previous question. What do you observc? $1 5,823,700 Fixed assets $ 36,400,000 4. Net plant and cquipment $101.481,200 As a practical matter, East Coast Yachts is unlikely to be willing to raise external equity capital, in part because the owners don't want to dilute their existing ownership and con- trol positions. However, East Coast Yachts is planning for a growth rate of 20 percent next year. What are your conclusions and recommendations ahout the feasibility of East Coast's expansion plans? Most assets can he increased as a percentage of sales. For instance, cash can he increased by any amount. However, fixed asscts often must be increased in specific amounts because it is impossible, as a practical matter, to buy part of a new plant or machine. In this case a company has a "staircase or "lumpy" fixed cost structure. Assume that East Coast Yachts is currently producing al 100 percent of capacity. As a resul, o expand production, the company must set up an entircly new line at a cost of $25 million. Calculate the new EFN with this assumption. What does this imply about capacity utilization for East Coust Yachts next year? Shareholders' equity $ 5,580,000 54.004.600 59.584,600 $7.304,900 Total liabilities and equity $117,304,900 Retained earnings Total equity 5. Total assets Yacht Industry Ratios EAST COAST YACHTS 2015 Income Statement Lower Mediar pper Current ratio Quick ratio Total asset turnover Inventory turnover $210,900,000 148,600,000 25,192,000 6,879,000 $ 30,229.000 1.89 Cost of goads sold Other expenses Earnings before interest and taxes (EBIT) 11.8 Debt ratio Taxable income Taxes (40%) Nct income $ 26,438,000 0.575.200 $15,862,800 Equity multipier Interest coverage Profit margin Return on assets Return on equity 6.98% Dividends Add to RE $ 4,759,30 $11,103.499 6.05% 15 83% 16.54% I. 2. Compare the performance of East Coast Yachts to the industry as a whole. For each EAST COAST YACHTS Balance Sheet as of December 31, 20I5 Calculate all of the ratios listed in the industry table for East Coast Yachts. 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 Liabilities & Equity Current labilities $ 6,977,700 14.342,600 21,320,300 $ 3,2B5,600 Acournts payable 5,910,800 Notes payable 6.627.300 Accounts receivable 3. Calculate the sustainable growth rate of Fast Coast Yachts. Calculale external funds needed (EFN) and prepare pro forma income statements and balance sheets assuming growth at precisely this rale. Recalculale the ratios in the previous question. What do you observc? $1 5,823,700 Fixed assets $ 36,400,000 4. Net plant and cquipment $101.481,200 As a practical matter, East Coast Yachts is unlikely to be willing to raise external equity capital, in part because the owners don't want to dilute their existing ownership and con- trol positions. However, East Coast Yachts is planning for a growth rate of 20 percent next year. What are your conclusions and recommendations ahout the feasibility of East Coast's expansion plans? Most assets can he increased as a percentage of sales. For instance, cash can he increased by any amount. However, fixed asscts often must be increased in specific amounts because it is impossible, as a practical matter, to buy part of a new plant or machine. In this case a company has a "staircase or "lumpy" fixed cost structure. Assume that East Coast Yachts is currently producing al 100 percent of capacity. As a resul, o expand production, the company must set up an entircly new line at a cost of $25 million. Calculate the new EFN with this assumption. What does this imply about capacity utilization for East Coust Yachts next year? Shareholders' equity $ 5,580,000 54.004.600 59.584,600 $7.304,900 Total liabilities and equity $117,304,900 Retained earnings Total equity 5. Total assets