Case 2 Chem Med Company

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Case 2 Chem-Med Company 1. Net Sales Growth (all credit)=[(Current Year Net Sales-Last Year Net Sales)/Last Year Net Sales]X100 a. Sales Growth 2007=[(3814-3051)/3051]X100= 25% b. Using the same formula for the remaining years and the data in figure 1 of the pro forma section: 2008=40% c. 2009=40% d. 2010=40% 2. Net Income Growth=[(Current Year Net Income-Last Year Net Income)/Last Year Net Income]X100 e. Net income Growth 2007=[(1150-766)/766]X100=50% f. Using the same formula for the remaining years and the data in figure 1 of the pro forma section: 2008=40% g. 2009=21% h. 2010=49% i. For 2007 and 2010, the net income growth is faster. 2008 is the same. 2009 is…show more content…
The banker also requested that it be less than .3, so that is promising. 5. Using the average collection period formula on pg 61 of the text: 2007 Average Collection Period=Accounts Receivable/Average Daily credit sales. The formula for Average Daily Credit Sales=Net sales/365 (364 if it’s a leap year…something to consider) t. 2007 Average Collection Period=564/(3814/365)=54 u. Using the same formula 2008 Average Collection Period=62 v. 2009=73 w. 2010=82 x. The trend is getting longer by about 10 days per year. The book doesn’t really say what the consequences of a high or low average collection period are. It reads “asset utilization ratios measure how many times per year a company sells its inventory or collects all of its accounts receivable” (57). To me, they needs to sell their inventory quicker or decrease the amount that they’re making. From the scenario given, it seems like Pharmacia is taking more of their business based on their cheaper prices. Dr. Swan needs to market better or develop some new products with R/D spending. 6. Using formula 3A on pg 59, Chem Med’s ROE Ration=(Net income/stockholder’s equity)X100 y. Chem Med’s ROE Ration=1150/3877=29.7% z. Industry’s for 2007 was 12.29%, so Chem Med is more than doubling that. {. Using the Dupont method, Dupont ROE=Profit Margin x Asset Turnover/(1-Debt to assets) ii. 2007 Chem Med Dupont ROE=[(Net income/sales)xAsset

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