Computron's Balance Sheets (Millions of Dollars) Projection 2018 2019 2020E Assets Cash and equivalents $ 60 $ 50 $ 60 Short-term investments 100 10 50 Accounts receivable 400 520 530 Inventories 620 820 660 Total current assets $ 1,180 $ 1,400 $ 1,300 Net Fixed Assets 2,900 3,500 3,700 Total Assets $ 4,080 $ 4,900 $ 5,000 Liabilities and equity Accounts payable $ 300 $ 400 $ 330 Notes payable 50 250 100 Accruals 200 240 270 Total current liabilities $ 550 $ 890 $ 700 Long-term bonds 800 1,100 1,100 Total liabilities $ 1,350 $ 1,990 $ 1,800 Common stock (100,000 shares) 1,000 1,000 1,000 Retained earnings 1,730 1,910 2,200 Total common equity $ 2,730 $ 2,910 $ 3,200 Total liabilities and equity $ 4,080 $ 4,900 $ 5,000 Income Statements (Millions of Dollars) Projection 2018 2019 2020E Net sales $ 5,500 $ 6,000 $ 6,600 Cost of goods sold (Excluding depr.) $ 4,300 $ 4,800 $ 5,210 Depreciationa $ 290 $ 320 $ 370 Other operating expenses $ 350 $ 420 $ 400 Earnings before interest and taxes (EBIT) $ 560 $ 460 $ 620 Less interest $ 68 $ 108 $ 100 Pre-tax earnings $ 492 $ 352 $ 520 Taxes (25%) $ 123 $ 88 $ 130 Net Income $ 369 $ 264 $ 390 Notes: a Computron has no amortization charges. Additional Information Projection 2018 2019 2020E Year-end common stock price $50.00 $30.00 $49.00 Shares outstanding (millions) 100 100 100 Common dividends (millions) $90 $84 $100 Tax rate 25% 25% 25% Additions to retained earnings (millions) $279 $180 $290 Lease payments (millions) $20 $20 $20 Per Share Information Projection 2018 2019 2020E EPS $3.69 $2.64 $3.90 DPS $0.90 $0.84 $1.00 Book Value Per Share $27.30 $29.10 $32.00 Ratio Analysis 2018 2019 2020E Industry Average Profit margin 6.7% 4.4% 7.2% Operating profit margin 10.2% 7.7% 10.4% Basic earning power 13.7% 9.4% 15.6% ROA 9.0% 5.4% 10.8% ROE 13.5% 9.1% 15.4% Inventory turnover 7.4 6.2 9.0 Days sales outstanding 26.5 31.6 28.0 Fixed assets turnover 1.9 1.7 3.0 Total assets turnover 1.348 1.224 1.5 Current 2.1 1.6 2.5 Quick 1.0 0.7 1.9 Debt ratio 20.8% 27.6% 15.0% Debt-to-equity ratio 0.31 0.46 0.22 Liabilities-to-assets ratio 33.1% 40.6% 32.0% Earnings multiplier 1.5 1.7 1.5 TIE 8.2 4.3 13.0 EBITDA coverage 9.9 6.3 17.2 Price/earnings (P/E) 13.6 11.4 16.8 Market/book 1.8 1.0 2.7 Calculate the projected inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. Explain how Computrong’s utilization of assets stack up against that of other firms in its industry. Calculate the projected current and quick ratios based on the projected balance sheet and income statement data. Explain what you learned about the company’s liquidity position and trend.

Computron's Balance Sheets (Millions of Dollars) Projection 2018 2019 2020E Assets Cash and equivalents $ 60 $ 50 $ 60 Short-term investments 100 10 50 Accounts receivable 400 520 530 Inventories 620 820 660 Total current assets $ 1,180 $ 1,400 $ 1,300 Net Fixed Assets 2,900 3,500 3,700 Total Assets $ 4,080 $ 4,900 $ 5,000 Liabilities and equity Accounts payable $ 300 $ 400 $ 330 Notes payable 50 250 100 Accruals 200 240 270 Total current liabilities $ 550 $ 890 $ 700 Long-term bonds 800 1,100 1,100 Total liabilities $ 1,350 $ 1,990 $ 1,800 Common stock (100,000 shares) 1,000 1,000 1,000 Retained earnings 1,730 1,910 2,200 Total common equity $ 2,730 $ 2,910 $ 3,200 Total liabilities and equity $ 4,080 $ 4,900 $ 5,000 Income Statements (Millions of Dollars) Projection 2018 2019 2020E Net sales $ 5,500 $ 6,000 $ 6,600 Cost of goods sold (Excluding depr.) $ 4,300 $ 4,800 $ 5,210 Depreciationa $ 290 $ 320 $ 370 Other operating expenses $ 350 $ 420 $ 400 Earnings before interest and taxes (EBIT) $ 560 $ 460 $ 620 Less interest $ 68 $ 108 $ 100 Pre-tax earnings $ 492 $ 352 $ 520 Taxes (25%) $ 123 $ 88 $ 130 Net Income $ 369 $ 264 $ 390 Notes: a Computron has no amortization charges. Additional Information Projection 2018 2019 2020E Year-end common stock price $50.00 $30.00 $49.00 Shares outstanding (millions) 100 100 100 Common dividends (millions) $90 $84 $100 Tax rate 25% 25% 25% Additions to retained earnings (millions) $279 $180 $290 Lease payments (millions) $20 $20 $20 Per Share Information Projection 2018 2019 2020E EPS $3.69 $2.64 $3.90 DPS $0.90 $0.84 $1.00 Book Value Per Share $27.30 $29.10 $32.00 Ratio Analysis 2018 2019 2020E Industry Average Profit margin 6.7% 4.4% 7.2% Operating profit margin 10.2% 7.7% 10.4% Basic earning power 13.7% 9.4% 15.6% ROA 9.0% 5.4% 10.8% ROE 13.5% 9.1% 15.4% Inventory turnover 7.4 6.2 9.0 Days sales outstanding 26.5 31.6 28.0 Fixed assets turnover 1.9 1.7 3.0 Total assets turnover 1.348 1.224 1.5 Current 2.1 1.6 2.5 Quick 1.0 0.7 1.9 Debt ratio 20.8% 27.6% 15.0% Debt-to-equity ratio 0.31 0.46 0.22 Liabilities-to-assets ratio 33.1% 40.6% 32.0% Earnings multiplier 1.5 1.7 1.5 TIE 8.2 4.3 13.0 EBITDA coverage 9.9 6.3 17.2 Price/earnings (P/E) 13.6 11.4 16.8 Market/book 1.8 1.0 2.7 Calculate the projected inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. Explain how Computrong’s utilization of assets stack up against that of other firms in its industry. Calculate the projected current and quick ratios based on the projected balance sheet and income statement data. Explain what you learned about the company’s liquidity position and trend.

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter3: Financial Statements, Cash Flow, And Taxes

Section: Chapter Questions

Problem 12P

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Computron's Balance Sheets (Millions of Dollars)			Projection
	2018	2019	2020E
Assets
Cash and equivalents	$ 60	$ 50	$ 60
Short-term investments	100	10	50
Accounts receivable	400	520	530
Inventories	620	820	660
Total current assets	$ 1,180	$ 1,400	$ 1,300
Net Fixed Assets	2,900	3,500	3,700
Total Assets	$ 4,080	$ 4,900	$ 5,000

Liabilities and equity
Accounts payable	$ 300	$ 400	$ 330
Notes payable	50	250	100
Accruals	200	240	270
Total current liabilities	$ 550	$ 890	$ 700
Long-term bonds	800	1,100	1,100
Total liabilities	$ 1,350	$ 1,990	$ 1,800
Common stock (100,000 shares)	1,000	1,000	1,000
Retained earnings	1,730	1,910	2,200
Total common equity	$ 2,730	$ 2,910	$ 3,200
Total liabilities and equity	$ 4,080	$ 4,900	$ 5,000


Income Statements (Millions of Dollars)			Projection
	2018	2019	2020E
Net sales	$ 5,500	$ 6,000	$ 6,600
Cost of goods sold (Excluding depr.)	$ 4,300	$ 4,800	$ 5,210
Depreciationa	$ 290	$ 320	$ 370
Other operating expenses	$ 350	$ 420	$ 400
Earnings before interest and taxes (EBIT)	$ 560	$ 460	$ 620
Less interest	$ 68	$ 108	$ 100
Pre-tax earnings	$ 492	$ 352	$ 520
Taxes (25%)	$ 123	$ 88	$ 130
Net Income	$ 369	$ 264	$ 390

Notes:
a Computron has no amortization charges.

Additional Information			Projection
	2018	2019	2020E
Year-end common stock price	$50.00	$30.00	$49.00
Shares outstanding (millions)	100	100	100
Common dividends (millions)	$90	$84	$100
Tax rate	25%	25%	25%
Additions to retained earnings (millions)	$279	$180	$290
Lease payments (millions)	$20	$20	$20


Per Share Information			Projection
	2018	2019	2020E
EPS	$3.69	$2.64	$3.90
DPS	$0.90	$0.84	$1.00
Book Value Per Share	$27.30	$29.10	$32.00




Ratio Analysis	2018	2019	2020E	Industry Average

Profit margin	6.7%	4.4%		7.2%
Operating profit margin	10.2%	7.7%		10.4%
Basic earning power	13.7%	9.4%		15.6%
ROA	9.0%	5.4%		10.8%
ROE	13.5%	9.1%		15.4%
Inventory turnover	7.4	6.2		9.0
Days sales outstanding	26.5	31.6		28.0
Fixed assets turnover	1.9	1.7		3.0
Total assets turnover	1.348	1.224		1.5
Current	2.1	1.6		2.5
Quick	1.0	0.7		1.9
Debt ratio	20.8%	27.6%		15.0%
Debt-to-equity ratio	0.31	0.46		0.22
Liabilities-to-assets ratio	33.1%	40.6%		32.0%
Earnings multiplier	1.5	1.7		1.5
TIE	8.2	4.3		13.0
EBITDA coverage	9.9	6.3		17.2
Price/earnings (P/E)	13.6	11.4		16.8
Market/book	1.8	1.0		2.7

Calculate the projected inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. Explain how Computrong’s utilization of assets stack up against that of other firms in its industry.
Calculate the projected current and quick ratios based on the projected balance sheet and income statement data. Explain what you learned about the company’s liquidity position and trend.

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