You have a friend who has been hired as an intern to assist the CFO of \"Simon Y

Question

You have a friend who has been hired as an intern to assist the CFO of "Simon Yu, Inc." with variety of financial analyses. It is almost year-end, and your friend has been assigned to calculate a few numbers for the CFO. Unfortunately, his dog ate some of the important data, and you have been asked to help him with his assignment.

"Simon Yu Inc." is a 100% equity firm, and usually falls under the 35% tax bracket. This fiscal year, the company realized total revenue of $1,650,000 and EBIT of $300,000. In the past, the cost of goods sold amounts to approximately 80% of its revenue.

On the Asset portion of the Balance Sheet we have

Current Assets in 2013 = 225,000 and Current Assets in 2014 = 407,0000

Fixed Assets in 2013 = 130,000 and Fixed Assets in 2014 = 150,000

Total Assets in 2013 = ? and Total Assets in 2014?

1. Structure an income statement for Simon Yu, Inc. for 2014

2. What is ROA of the company for 2014?

3. What is the OCF for 2014?

4. Assume a payout ratio of 15%, and that cash dividends are the only kind of dividend the company offers, how much new equity did the company issue this year?

Explanation / Answer

Particulars Amount Total Assets 2013=225000+130000 355000 Total Assets 2014=407000+150000 557000 1>Profit after Tax in 2014=300000*(1-Tax Rate)=300000*(1-0.35) 195000 Profit after tax in 2013=1650000*(1-0.80)*(1-0.35) 214500 2>ROA in 2014=Profit after Tax/Assets in %=(195000/557000)*100 35.0 3>OCF in 2014=Profit after Tax 195000 4>Amount of Dividend paid in 2014=0.15*195000 29250 From this figure, it is not possible to find out the new equity issued by the company.

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