Crowley Building Supply sells various building materials to retail outlets. The
ID: 2532824 • Letter: C
Question
Crowley Building Supply sells various building materials to retail outlets. The company has just approached Sycamore State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The company's financial statements for the most recent two years follow: Crowley Building Supply Comparative Balance Sheets This Year Last Year Assets Current assets $ 58,000 $ 143,000 21,000 291,000 590,060 28,000 Marketable securities 3,000 479,000 950,120 21,000 Accounts receivable, net Inventory Prepaid expenses 1,511,120 1,644,620 1,073,060 1,549,580 Total current assets Plant and equipment, net Total assets Liabilities and Stockholders' Equity $ 3,155,740 2,622,640 Liabilities Current liabilities Bonds payable, 8% S 809,000 448,000 618,000 618,000 Total liabilities 1,427,000 1,066,000 Stockholders' equity: Preferred stock, $25 par, 7% Common stock, $10 par Retained earnings 321,000 513,000 894,740 321,000 513,000 722.640 Total stockholders' equity 1,556,640 Total liabilities and stockholders' Equity $ 3,155,740 2,622,640 Crowley Building Supply Comparative Income Statement and Reconciliation Last Year Sales $5,027,000 $ 4,369,000 3,438,400 Cost of goods sold 3,874,400 Gross margin 930,600 534.600 1,152,600 Selling and administrative expenses 653,600 Net operating income 499,000 396,000 49,440 Interest expense 49,440 449,560 346,560 121,296 Net income before taxes Income taxes (35%) Net income Dividends paid: 157,346 292,214 22,470 225,264 Preferred dividends 22,470 Common dividends Total dividends paid Net income retained 97,644 120,114 172,100 84,624 140,640 582,000 Retained earnings, beginning of year 722,640 Retained earnings, end of year $ 894,740 722,640Explanation / Answer
This Year Last Year Debt equity Ratio Debt/Equity Debt/Equity Debt equity Ratio 1427000/1728700 0.83 1066000/1556640 0.68 Times Interest Earned EBIT/Interest EBIT/Interest Times Interest Earned 499000/49440 10.1 396000/49440 8 Common Size Balance sheet This Year % Last Year % Assets Current Assets Cash 58,000.00 1.8% 143,000.00 5.5% Marketable Securities 3,000.00 0.1% 21,000.00 0.8% Accounts Receivable 479,000.00 15.2% 291,000.00 11.1% Inventory 950,120.00 30.1% 590,060.00 22.5% Prepaid expenses 21,000.00 0.7% 28,000.00 1.1% Total current Assets 1,511,120.00 47.9% 1,073,060.00 40.9% Property,Plant & Equipment(net) 1,644,620.00 52.1% 1,549,580.00 59.1% Total Assets 3,155,740.00 100.0% 2,622,640.00 100.0% Liabilities and Shareholders Funds Liability Current Liability 809,000.00 25.6% 448,000.00 17.1% Bonds Payable,8% 618,000.00 19.6% 618,000.00 23.6% Total Liability 1,427,000.00 45.2% 1,066,000.00 40.6% StockHolder's Equity Preferred Stock 321,000.00 10.2% 321,000.00 12.2% Common Stock 513,000.00 16.3% 513,000.00 19.6% Retained earnings 894,700.00 28.4% 722,640.00 27.6% Total StockHolder's Equity 1,728,700.00 54.8% 1,556,640.00 59.4% Total Liabilities & Stockholders equity 3,155,700.00 100.0% 2,622,640.00 100.0% Common Size Income Statement This Year % Last Year % Sales 5,027,000.00 100.0% 4,369,000.00 Cost of Goods Sold 3,874,400.00 77.1% 3,438,400.00 78.7% Gross Margin 1,152,600.00 22.9% 930,600.00 21.3% Selling and Adminstrative Expenses 653,600.00 13.0% 534,600.00 12.2% Net Operating income 499,000.00 9.9% 396,000.00 9.1% Interest Expenses 49,440.00 1.0% 49,440.00 1.1% Net Income Before Tax 449,560.00 8.9% 346,560.00 7.9% Income Tax 157,346.00 3.1% 121,296.00 2.8% Net Income 292,214.00 5.8% 225,264.00 5.2%
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