US 344.70 Business Finance- Spring 2018 israel noumansana 4/1/18 8:26 PM omework
ID: 2559003 • Letter: U
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US 344.70 Business Finance- Spring 2018 israel noumansana 4/1/18 8:26 PM omework: Chapter 12 Mini-Case Save core: 0 of 10 pts 1 of 1 (0 complete) Hw Score: 0%, 0 of 10 pt Show Work Question Help ini Case. Chapter 12 #1 (similar to) Imagine that you were hired recently as a financial analyst for a relatively new, highly leveraged ski manufacturer located in the foothils f Colorado's Rocky Mountains. Your firm manufactures only one product, a state-of-the-art snow ski. Up to this point the company has been operating without much quantitative knowledge of the business and financial risks it faces. meeting for next week with the CFO, Maria Sanchez, to discuss matters such as the business and financial risks faced by the company information in the popup window, EEB regarding the cost structure of the company supporting work papers that show how you arrived at your conclusions. You know Maria would like to see these work a. Before you can compute the firm's break-even point in sales dollars, you need to compute some items on the firm's income statement. Ski season just ended, however, so the president of the company has started to focus more on the financial aspects of managing the business. He has set upa Accordingly, Mariajhas asked you to prepare an analysis to assist her in her discussions with the president. As a first step in As the next step, you need to determine the break-even point in units of output for the company. One of your strong points has been that you always prepare papers to facilitate her review of Press Continue to see more. Continue 1 2 remaining Copyright 2018 Pearson EducationExplanation / Answer
Basic Calculations Current turnover Operating asset turnover= Turnover/Operating asset 12 = Turnover/3200000 So, Turnover = 38400000 Return on operating assets= Net Income after taxes/Operating assets 35% = Net Income after taxes/3200000 So, Net Income after taxes= 1120000 Add :Income taxes 686452 Net Income before taxes 1806452 Add : Interest expense 500000 Net Operating Income 2306452 Degree of Operating Leverage =Contribution/Net operating income 5 times = Contribution/2306452 Contribution = 11532260 Less : Net Operating Income 2306452 Fixed costs 9225808 Contribution ratio = =11532260/38400000% 30.03192708 Requirement a Break Even Sales in dollars =Fixed costs/Contribution ratio =9225808/30.03192708% 30720000 Requirement b If sales increase by 25% Sales 48000000 Variable costs 33584675 Contribution Margin 14415325 Less : Fixed asset 9225808 Operating Income 5189517 Less : Interest 500000 Net Income berfore taxes 4689517 Income tax expense 1782016.46 Net Income 2907500.54 Eaning before tax would increase by = =(4689517-1806452)/1806452% 159.60 % Net Income would increase by = =(2907501-2306452)/2306452% 26.06 % Requirement c As prepared in requirement b
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