Assume sales grow 40% in 2021 over 2020; the average collection period increases by 9 days in 2021 compared to 2020 (360 days in the year), inventory turnover based on sales decreases by 1 in 2021 compared to 2020, Zedo pays a constant percentage of Net Income as a dividend, and 2020 net fixed assets are operating at 90% of capacity.

INCOME STATEMENT	2020	2021
Net Sales	$800
Cost of Goods Sold	- 650
EBIT	$150
Interest Expense	-15
EBT	$135
Taxes @ 40%	-54
Net Income	$81
Dividends	$27
Additions to Retained Earnings	54
BALANCE SHEET – ASSETS
Cash	$50
Accounts Receivable	80
Inventories	100
Total Current Assets	$230
Net Fixed Assets	370
Total Assets	$600
LIABILITIES AND EQUITY
Accounts Payable	$60
Notes Payable	20
Accruals	20
Total Current Liabilities	$100
Long-term Debt	100
Common Stock	190
Retained Earnings	210
Total Liabilities and Equities	$600

Estimate the following ratios for ZEDO after the first pass for 2021 assuming any additional financing needed is obtained 25% with notes payable and 75% long-term debt.  Assume in 2020, short-term interest rates were 3% points less than long-term rates; i.e. if short-term rates are 6%, then long-term rates are 9%.  Assume further that rates are expected to remain at those levels in 2021.  Finally, any remaining AFN after 1^st pass is included in total debt for ratios.

Current Ratio

 

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Times Interest Earned Ratio

 

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Total Debt Ratio

 

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Net Profit Margin

 

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Total Asset Turnover

 

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DISCUSS THE STRENGTHS AND WEAKNESSES YOU SEE WITH ZEDO.