10 ( total points) 700,000 Use the following information to complete the income

Question

10 ( total points)

         700,000

Use the following information to complete the income statement for Company A for the year ending December 31, 2013 (show work): Answers go BELOW points mention here for grades. so dont worry about that Income Statement Information Revenue ############ Gross Margin 40.0% Selling General and Administrative (SG&A) 21.0% of revenue Research and Development (R&D) 12.0% of revenue Depreciation expense (D&A) $   5,000,000 Interest Expense $   5,000,000 Interest Income $   2,500,000 Tax Rate 35% Securities Information Weighted Average Shares (12/31/13)         10,000,000 A Warrants exercisable @ $2.00           2,200,000 B Warrants exercisable @ $3.00           2,500,000 Stock Price (12/31/13) $   4.00 Complete the following Income Statement Answers go in the yellow boxes Points Revenue ############ $   115,000,000 Cost of Goods Sold 1 Gross Profit 1 Operating Expenses SG&A 1 R&D 1 D&A Operating Expenses Total 1 Operating Income 5 Interest Expense, net 1 Pre Tax Income 1 Tax 1 Net Income 2 EPS Basic 5 EPS Diluted 10 Total Points 30 Use this table (below) to help with your calculations Diluted Share Calculations Basic A warrants B warrants Total Proceeds A warrants B warrants Total Proceeds Shares repurchased Diluted shares used to calculate Diluted EPS

Explanation / Answer

INCOME STATEMENT OF COMPANY A FOR THE YEAR ENDING DECEMBER 31,2013

AMOUNT($)

REVENUE XXX

ADD:INTEREST INCOME XXX

LESS:SELLING GENERAL AND ADMINISTRATION EXPENSE XXX

LESS:RESEARCH AND DEVELOPMENT EXPENSE XXX

LESS:DEPRECIATION XXX

LESS:INTEREST EXPENSE XXX

GROSS MARGIN XXX

LESS:TAX XXX

NET PROFIT XXX

INCOME STATEMENT

REVENUE XXX

LESS:COST OF GOODS SOLD XXX

GROSS PROFIT XXX

LESS:OPERATING EXPENSE XXX

OPERATING INCOME XXX

LESS:INTEREST EXPENSE XXX

NET PRETAX INCOME XXX

LESS:TAX XXX

NET INCOME XXX

PROBLEM 2

CALCULATION OF WORKING CAPITAL

WORKING CAPITAL=CURRENT ASSETS - CURRENT LIABILITIES

=CASH & MARKETABLE SECURITIES+ACCOUNTS RECEIVABLE+INVENTORY+OTHER CURRENT ASSETS - ACCOUNTS PAYABLE - CURRENT PORTION OF LONG TERM NOTES - OTHER CURRENT LIABILITIES

=2,000,000+3,000,000+4,000,000+1,000,000- 5,00,000-7,50,000-2,50,000

=10,000,000-15,00,000=$85,00,000

CALCULATION OF CURRENT RATIO

CURRENT RATIO=CURRENT ASSET / CURRENT LIABILITY=$10,000,000/$15,00,000 =6.67

PROBLEM 3

(NOTE: FIGURES ARE INCOMPLETE.AMOUNTS OF LIABILITIES SIDE ARE MISSING)

CURRENT RATIO=CURRENT ASSET/CURRENT LIABILITY= AMOUNT MISSING

ACCOUNTS RECEIVABLE TURNOVER= TURNOVER / AVERAGE ACCOUNTS RECEIVABLE =

$ 12,000,000 / $(2,000,000+2,000,000/2)=6

TOTAL ASSET TURNOVER = TURNOVER / TOTAL ASSETS = $ 12,000,000 / $ 18,000,000=0.67

INVENTORY TURNOVER=TURNOVER / INVENTORY =$ 12,000,000 / $ 3,000,000 =4

LIABILITIES TO EQUITY=LIABILITIES / EQUITY=AMOUNT MISSING

REVENUE TO CASH= REVENUE / AVERAGE CASH= $12,000,000 / $(2,000,000+3,000,000/2)=12,000,000/2,500,000=4.8

DAYS REVENUE IN CASH=(ACCOUNTS RECEIVABLE /TOTAL SALES)* NO.OF DAYS=(2,000,000/12,000,000)*365=60.83

DAYS INVENTORY=(INVENTORY/COST OF SALES)*365=(3,000,000/5,000,000)*365=219

RETURN ON ASSET=PROFIT/TOTAL ASSETS=$ 6,50,000/ $ 18,000,000=0.036

RETURN ON EQUITY=PROFIT FOR EQUITY SHARE HOLDERS/EQUITY SHARE CAPITAL=$6,50,000/$ 5,000,000=0.13

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