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2014 2015 BALANCE SHEETS: Assets: Cash 120,000 160,000 Accounts Receivable 520,0

ID: 2735140 • Letter: 2

Question

                                                                        2014                            2015

BALANCE SHEETS:

Assets:

                        Cash                                        120,000                       160,000

                        Accounts Receivable               520,000                       620,000

                        Inventory                                305,000                       290,000

                        Fixed Assets, net                     410,000                       510,000

                        Total Assets                            1,355,000                    1,580,000

Liabilities and Equity:

                        Accounts Payable                    350,000                       375,000

                        Long-term Debt                      500,000                       625,000

                        Common Stock                       50,000                         75,000

                        Retained Earnings                   455,000                       505,000

                        Total Liabilities and Equity    1,355,000                    1,580,000

INCOME STATEMENT:

            Revenue                                                                                  3,500,000

            Cost of Goods Sold                                                                2,275,000

            General and Administrative                                                    515,000

            Depreciation Expense                                                             120,000

            Earnings Before Interest and Taxes                                        590,000

            Interest Expense                                                                      40,000

            Pretax Net Income                                                                  550,000

            Income Taxes                                                                          187,000

            Net Income                                                                             363,000

           

What was Plyler’s Quick Ratio at the end of 2015?

What was Plyler’s Debt to Equity Ratio at the end of 2015? (Exclude AP from Debt)

What was Plyler’s Times Interest Earned Ratio in 2015?

Assuming that all Plyler’s sales are on credit, how many days, on average, did it take the firm to sell its inventory in 2015? (For balance sheet accounts, use the average of the beginning and end-of-year balances).

Assuming that all Plyler’s sales are on credit, what was the company’s Days Sales Outstanding in 2015? (For balance sheet accounts, use the average of the beginning and end-of-year balances).

Starting with Net Income, show the calculation of Cash Flow from Operations for Plyler for 2015?

What was Plyler’s Equity Multiplier for 2015?

What was Plyler’s Return on Equity in 2015 (For balance sheet accounts, use the average of the beginning and end-of-year balances)?

If Plyler had 100,000 common shares outstanding during 2015 and its stock is currently worth $43.56 per share, what is the firm’s Price : Earnings (PE) ratio?

If Plyler projects 2016 sales to increase by 15% over 2015, its after-tax profit margin to remain the same, and anticipates a 30% dividend payout ratio, what are its projected retained earnings by the end of 2016?

Assuming that Plyler’s net working capital varies directly with sales, based on a 15% sales increase in 2016, what is the projected (or pro forma) accounts receivable balance at the end of 2016?

If Plyler projects that by the end of 2015, it was operating at 70% of capacity, what is its full level capacity of sales?

Stop and Shop Supermarkets has a 4.5% profit margin and a 15% dividend payout ratio. The total asset turnover is 1.6 and its debt-equity ratio is 0.6. What is its sustainable rate of growth?

Merrick Town Bagel has a 9% percent return on assets and a 75% percent retention ratio. What is its internal growth rate?

Explanation / Answer

1) What was Plyler’s Quick Ratio at the end of 2015?

Quick ratio = quick assets / quick liabilities

                    = (160000+620000) / 375000

                    = 2.08 times

2) What was Plyler’s Debt to Equity Ratio at the end of 2015? (Exclude AP from Debt)

debt-to-Equity ratio = Debt / Equity.

Debt = 625000 (Representing Bond)

Equity= 580000 (Representing stock holders equity)

Debt- to- equity ratio =625000 / 580000

                                      = 1.08

3) What was Plyler’s Times Interest Earned Ratio in 2015?

Times Interest Earned Ratio = EBIT / Interest expense

                                                     = 590000 / 40000

                                                      = 14.75times

4) Assuming that all Plyler’s sales are on credit, how many days, on average, did it take the firm to sell its inventory in 2015.

Inventory turnover ratio = Cost of goods sold / Average inventory

                                          = 2275000 / [ (305000+290000)/2]

                                           = 7.65 days