1 of 6 If Jares, Inc., has an equity multiplier of 1.62, total asset turnover of

Question

1 of 6 If Jares, Inc., has an equity multiplier of 1.62, total asset turnover of 2.40, and a profit margin of 4.2 percent, what is its ROE? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

%  

4 of 6 Assume the following ratios are constant:

What is the sustainable growth rate? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

%

5 of 6 .Cheryl Colby, CFO of Charming Florist Ltd., has created the firm’s pro forma balance sheet for the next fiscal year. Sales are projected to grow by 20 percent to $450 million. Current assets, fixed assets, and short-term debt are 15 percent, 70 percent, and 5 percent of sales, respectively. Charming Florist pays out 20 percent of its net income in dividends. The company currently has $133 million of long-term debt and $61 million in common stock par value. The profit margin is 16 percent.

Prepare the current balance sheet for the firm using the projected sales figure. (Enter your answers in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your answers to the nearest whole dollar amount. (e.g., 32))

Based on Ms. Colby’s sales growth forecast, how much does Charming Florist need in external funds for the upcoming fiscal year? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your final answer to the nearest whole dollar amount. (e.g., 32))

Prepare the firm’s pro forma balance sheet for the next fiscal year. (Enter your answers in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. (e.g., 32))

Calculate the external funds needed. (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your final answer to the nearest whole dollar amount. (e.g., 32))

6 of 6. In addition to common-size financial statements, common–base year financial statements are often used. Common–base year financial statements are constructed by dividing the current year account value by the base year account value. Thus, the result shows the growth rate in the account.

Prepare the common-size balance sheet and common–base year balance sheet for the company. Use 2011 as the base year. (Do not round intermediate calculations. Round your common size answers to 2 decimal places. (e.g., 32.16) and common base year answers to 4 decimal places. (e.g., 32.1616))

%  

Explanation / Answer

          ROE= (Net profit/Sales) *(Sales/Assets) *(Asset/equity)

= 4.2*2.40*1.62

= 16.33

          ROE= (Net profit/Sales) *(Sales/Assets) *(Asset/equity)

= 6.2*3.30*1.50

= 30.69

Retention ratio =1-Payout ratio

= 1-0.22

= 0.78

The sustainable growth rate = Retention ratio* ROE

= 0.78*30.69

= 23.94

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