ZHIAO-WAYInc.

Balance Sheet

As of December 31,2016

Assets

Cash and equivalents295,500

Accounts receivable875,000

Inventory437,500

Total Current Assets1,608,000

Plant and equipment475,000

Accumulated depreciation (234,550)

Net Fixed Assets 240,450

Total Assets1,848,450

Liabilities and Owner's Equity

Accounts payable306,250

Short-term notes payable88,185

Other current liabilities18,200

Total Current Liabilities412,635

Long-term debt495,800

Total Liabilities908,435

Common Stock700,000

Retained earnings240,015

Total Shareholder's Equity940,015Total Liabilities and Owner's Equity1,848,450

ZHIAO-WAY Inc.

Income Statement

For the year Ended December 31, 2016

Sales1,750,000

Cost of goods sold1,225,000

Gross Profit525,000

Selling and G & A Expenses262,500

Fixed Expenses43,750

Depreciation Expense80,000

EBIT138,750

Interest Expense56,800

Earnings Before Taxes81,950

Taxes @30%24,585

Net Income57,365

Ratio Industry Liquidity Ratios

Current

3.00x

Quick

2.20x

Efficiency Ratios

Inventory Turnover

4.50x

A/R Turnover

4.00x

Average Collection Period

90

Fixed Asset Turnover

6.50x

Total Asset Turnover

2.70x

Leverage Ratios

Total Liabilities Ratios

50.00%

Long-term Debt Ratio

30.00%

Total Liabilities to Equity

1.00x

LTD to Equity

55.00%

Coverage Ratios

Times Interest Earned

4.00x

Profitability Ratios

Gross Profit Margin

30.00%

Operating Profit Margin

10.50%

Net Profit Margin

4.95%

Return on Total Assets

4.20%

Return on Equity

8.50%

Note: Inv. Turnover uses C.G.S. instead of Sales for computation.

i.e.,

Inv. Turn = C.G.S. / Inv.

SPREADSHEET ASSIGNMENT # 1: "Zhiao-Way Inc."/Fin502/WI18

"Zhiao-Way Inc." sells two grades of asphalt. In 2017 sales for the two grades were $1,200,000 for Grade 1, and $865,000 for Grade 2. Cost of goods sold for the two grades were 68% and 60% of sales, respectively. Selling and G & A expenses continued to increase at a rate of 14% a year. Fixed expenses increased to $75,000, and $125,000 in depreciation allowance was taken.

"Zhiao-Way Inc." also has $180,000 in short-term debt at 6% interest, and has increased its long-term debt by $105,000 to partially pay for new equipment of $255,000. The remainder of the equipment was paid in cash.

All long-term debt carries an interest rate of 8%. The corporation's tax rate is 30% in 2017. Accounts receivable is at 38% of sales, and inventory at year end is 28% of sales. Accounts payable are held at 25% of the cost of goods sold. Other current liabilities are $33,000. Common stock remained constant.

The firm retained 65% of its earnings, paying the remaining net income out as dividends. ( Roundretained earnings up to the next dollar.)

1. Prepare "Zhiao-Way Inc."'s income statement, balance sheet and statement of cash flow for the year 2017, and as of December 31, 2017. The firm's 2016 statements are (next page):

2. Compute "Zhiao-Way Inc."'s free cash flow for 2017, and its Return On Invested Capital (ROIC) for the years 2016, and 2017.

3. Given that "Zhiao-Way Inc."'s Weighted Average Cost of Capital (WACC) was 9.25% in 2016 and 2017, compute its Economic Value Added (EVA) for the years, 2016 and 2017.

4. The industry averages are also provided. Compute "Zhiao-Way Inc." 's corresponding ratios for 2016 and 2017, and give a concise evaluation of "Zhiao-Way Inc."'sfinancial position.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!I have done the work I just want to double check.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

FIN 502

SPREADSHEET ASSIGNMENT # 1: "Zhiao-Way Inc."/Fin502/WI18

1. Prepare "Zhiao-Way Inc."'s income statement, balance sheet and statement of cash flow for the year 2017, and as of December 31, 2017. The firm's 2016 statements are (next page):

ZHIAO-WAY Inc.

Income Statement

For the year Ended December 31, 2017

GRADE 1

GRADE 2

TOTAL

SALE

$1,200,000

$865,000

$2,065,000

COST OF GOOD SOLD 68%/60%

$816,000

$519,000

$1,335,000

GROSS PROFIT

$730,000

SELLING EXP 14% MORE

$299,250

DEPREDAITION

$125,000

EBIT

$305,750

INTERES EXPENS

SHORT TERM DEBT 6%

$180,000

$10,800

LONG TERM DEBT 8%

$105,000

$8,400

EBT

$286,550

TAX30%

$85,965

PAT

$200,585

RETAIN EARNINGS65%

$130,380

ZHIAO-WAY INC BALANCE SHEETAS OF DECEMBER 31 2017

ASSETS

LIABILITY & EQUITY

CASH AND EQUIVALENT

244580

ACC PAYBLE25% COGS

333750

ACC RECIVEBLE 25% COGS

784700

SHORT TERM NOTE PAYBLE

180000

INVENTORY 28% SALE

578200

OTHER CURENT LIABILITES

33000

TOTAL CURRENT ASSET

1607480

TOTAL CURENT LIABILITES

546750

PLANT AND EQUIPMENT

730000

LONG TERM DEBT

600800

ACCUMULATEDDEPRECIATION

359550

TOTAL LIABILITES

1147550

NET FIX ASSET

370450

COMMON STOCKS

700000

RETAIN EARNINGS

130380

TOTAL ASSET

1977930

TOTAL SHERHOLDER EQUITY

1977930

Zhiao -Way Inc

Cash FlowStatement Dec 2017

OeratingActivity

Net income

$200,585.00

Depreciation

$125,000.00

Acount Reciveble

$90,300.00

Inventory

-$140,700.00

Acount Payble

$152,500.00

Other curent liability

$15,000.00

Cash Flow From OperatingActivity

$442,685.00

Investing Activity

Plant and Equipment

-$255,000.00

Cash Flow From Investing Activity

$187,685.00

Financing Activity

Short Term note payble

$91,815.00

Long term note Payble

$105,000.00

Comon stock

$-

Divident paid

$-

Add beginning cash balance

$295,500.00

Ending cash Balance

$680,000.00

2. Compute "Zhiao-Way Inc."'s free cash flow for 2017, and its Return On Invested Capital (ROIC) for the years 2016, and 2017.

Free cash Flow = EBIT *(1-Tax) + Depreciation - Capital Expentiture - Change Working capital

FCF= 305750 * 0.7 + 125000 - 255000 - 375085

FCF= - 291060

ROIC= NOPAT/ INVESTED CAPITAL

2016 ROIC= 57365/1848450=3.1%

2017 ROIC=200585/ 1431180= 14%

3. Given that "Zhiao-Way Inc."'s Weighted Average Cost of Capital (WACC) was 9.25% in 2016 and 2017, compute its Economic Value Added (EVA) for the years, 2016 and 2017.

EVA=NOPAT -WACC (OPERATING CAPITAL)

2016 EVA= 57365- (9.25%* 297815) = 57365-27547=29817

2017 EVA=200585- (9.25%*571035) =200585-52820=147764