You have been hired to be the assistant to the Chief Financial Officer of RidgeRunner Mountain Bikes Inc.. The CFO has been asked to provide a report to the Board of Directors on the performance of the company for the 2020 year. The CFO has asked you to analyze the following financial data for the 2020 and 2019 years to help him answer the following questions. Balance Sheets Assets 2020 2019 Cash $ 7,282 $ 9,000 Short-term investments 51,000 48,600 Accounts receivable 652,160 351,200 Inventories 1,307,360 715,200 Total current assets 2,017,802 1,124,000 Gross fixed assets 1,273,950 491,000 Less: accumulated depreciation 263,160 146,200 Net fixed assets 1,010,790 344,800 Total assets $ 3,028,592 $ 1,468,800 Liabilities and Equity 2020 2019 Accounts payable $ 324,000 $ 145,600 Notes payable 720,000 200,000 Accruals 284,960 136,000 Total current liabilities 1,328,960 481,600 Long-term debt 1,000,000 323,432 Common stock (100,000 shares) 460,000 460,000 Retained earnings 239,632 203,768 Total equity 699,632 663,768 Total liabilities and equity $ 3,028,592 $ 1,468,800 Income Statements 2020 2019 Sales $ 5,834,400 $ 3,432,000 Cost of goods sold 4,900,000 2,864,000 Other expenses 600,000 340,000 Depreciation 116,960 18,900 Total operating costs 5,616,960 3,222,900 EBIT 217,440 209,100 Interest expense 126,000 62,500 EBT 91,440 146,600 Taxes (40%) 36,576 58,640 Net income $ 54,864 $ 87,960 Dividends paid $ 10,000 Other Data 2020 2019 Stock price $ 7.00 $ 8.50 WACC 10% 10% Common Size Balance Sheets Assets 2020 2019 Industry Cash 0.6% 0.3% Short term investments 3.3% 0.3% Accounts receivable 23.9% 22.4% Inventories 48.7% 41.2% Total current assets 76.5% 64.1% Total assets 100.0% 100.0% Liabilities and Equity 2020 2019 Industry Accounts payable 9.9% 11.9% Notes payable 13.6% 2.4% Accruals 9.3% 9.5% Total current liabilities 32.8% 23.7% Long-term debt 22.0% 26.3% Common stock 31.3% 20.0% Retained earnings 13.9% 30.0% Total equity 45.2% 50.0% Total liabilities and equity 100.0% 100.0% Common Size Income Statement 2020 2019 Industry Sales 100.0% 100.0% Cost of goods sold 83.4% 84.5% Other expenses 9.9% 4.4% Depreciation 0.6% 4.0% Total operating costs 93.9% 92.9% EBIT 6.1% 7.1% Interest expense 1.8% 1.1% EBT 4.3% 5.9% Taxes (40%) 1.7% 2.4% Net Income 2.6% 3.6% Financial Ratios 2020 2019 Industry Avg Current 2.3X 2.7X Quick 0.8X 1.0X Inventory Turnover 4.0X 6.1X Days Sales Outstanding 37 32 Fixed Asset Turnover 10.0X 7.0X Total Asset Turnover 2.3X 2.5X Debt ratio .548 .500 TIE 3.3X 6.2X Profit Margin 2.6% 3.6% Return on Assets 6.0% 9.0% Return on Equity 13.3% 17.9% Price/Earnings 9.7X 16.2X

a) Perform a common size analysis and percent change analysis on the 2020 Income Statement. What does the percentages tell you about the profitability of the company (i.e. how is it doing with regard to controlling its expenses)?

b) Compared to 2019 and Industry Average, how has the companys profitability changed?

c) What can you conclude about what investors think about the company when compared to Industry?

1. Whats the future value of $150 after 3 years if it earns 12%, annual compounding?

2. Whats the present value of $200 to be received in 3 years if the interest rate is 12%, annual compounding?

3. What annual interest rate would cause $200 to grow to $231.53 in 3 years? ___%

4. If a companys sales are growing at a rate of 10% annually, how many years will it take for sales to double?