Chapter 2. Ch 02 P14 Build a Model
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a. Cumberland Industries’ most recent sales were $455,000,000;
operating costs (excluding depreciation) were equal to 85% of sales; net
fixed assets were $67,000,000; depreciation amounted to 10% of net fixed
assets; interest expenses were $8,550,000; the state-plus-federal corporate
tax rate was 40% and Cumberland paid 25% of its net income out in
dividends. Given this information,
construct Cumberland’s income statement. Also calculate total dividends and
the addition to retained earnings.
The input information required for the problem is outlined in
the “Key Input Data” section below.
Using this data and the balance sheet above, we constructed the income
statement shown below.
Key Input Data for Cumberland Industries
2010
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(Thousands of
dollars)
Sales Revenue
$455,000
Expenses (excluding depreciation) as a percent of sales
85.0%
Net fixed assest
$67,000
Depr.
as a % of net fixed assets
10.0%
Tax rate
40.0%
Interest expense
$8,550
Dividend Payout Ratio
25%
Ch 03 P15 Build a Model
Joshua & White Technologies: December 31
Balance Sheets
(Thousands
of Dollars)
Assets
2010
2009
Cash and cash equivalents
$21,000
$20,000
Short-term investments
3,759
3,240
Accounts Receivable
52,500
48,000
Inventories
84,000
56,000
Total current assets
$161,259
$127,240
Net fixed assets
218,400
200,000
Total assets
$379,659
$327,240
Liabilities and equity
Accounts payable
$33,600
$32,000
Accruals
12,600
12,000
Notes payable
19,929
6,480
Total current liabilities
$66,129
$50,480
Long-term debt
67,662
58,320
Total liabilities
$133,791
$108,800
Common stock
183,793
178,440
Retained Earnings
62,075
40,000
Total common equity
$245,868
$218,440
Total liabilities and equity
$379,659
$327,240
Joshua & White Technologies December 31 Income
Statements
(Thousands
of Dollars)
2010
2009
Sales
$420,000
$400,000
Expenses
excluding depr. and amort.
327,600
320,000
EBITDA
$92,400
$80,000
Depreciation
and Amortization
19,660
18,000
EBIT
$72,740
$62,000
Interest
Expense
5,740
4,460
EBT
$67,000
$57,540
Taxes (40%)
26,800
23,016
Net Income
$40,200
$34,524
Common
dividends
$18,125
$17,262
Addition
to retained earnings
$22,075
$17,262
Other Data
2010
2009
Year-end Stock Price
$100.00
$96.00
# of shares (Thousands)
4,052
4,000
Lease payment (Thousands of Dollars)
$20,000
$20,000
Sinking fund payment (Thousands of Dollars)
$0
$0
Ratio Analysis
2010
2009
Industry Avg
Liquidity Ratios
Current Ratio
2.58
Quick Ratio
1.53
Asset Management Ratios
Inventory
Turnover
7.69
Days Sales
Outstanding
47.45
Fixed Assets
Turnover
2.04
Total Assets
Turnover
1.23
Debt Management Ratios
Debt Ratio
32.1%
Times-interest-earned ratio
15.33
EBITDA coverage
ratio
4.18
Profitability Ratios
Profit Margin
8.86%
Basic Earning
Power
19.48%
Return on Assets
10.93%
Return on Equity
16.10%
Market Value Ratios
Earnings per
share
NA
Price-to-earnings ratio
10.65
Cash flow per
share
NA
Price-to-cash
flow ratio
7.11
Book Value per
share
NA
Market-to-book
ratio
1.72
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