Your boss has come to you for advice on the current finances of the company and
ID: 2814656 • Letter: Y
Question
Your boss has come to you for advice on the current finances of the company and needs you to create an extended DuPont analysis, common size analysis, and percentage change analysis. Your boss wants you to fill out the attached Excel file because he/she has no idea what she is talking about and is going to use your report as her work. Questions are in excel (photos attached) but are as follows:
-Has J&W's liquidity position improved or worsened? Explain
-Has J&W's ability to manage its assets improved or worsened? Explain
-How has J&W's profitability changed during the last year?
-Perform an extended DuPont analysis for J7W for 2015 and 2016. What do these results tell you?
-Perform a common size analysis. What has happened to the composition (That is, the percentage in each category) of assets and liabilities?
-Perform a percentage change analysis. What does this tell you about the change in profitability and asset utilization?
Please fill in all yellow Squares with the appropriate answer.
Joshua & White Technologies: December 31 Balance Sheets (Thousands of Dollars) Assets 2016 2015 Cash and cash equivalents $21,000 $20,000 Short-term investments 3,759 3,240 Accounts Receivable 52,500 48,000 Inventories 84,000 56,000 Total current assets $161,259 $127,240 Net fixed assets 218,400 200,000 Total assets $379,659 $327,240 Liabilities and equity Accounts payable $33,600 $32,000 Accruals 12,600 12,000 Notes payable 19,929 6,480 Total current liabilities $66,129 $50,480 Long-term debt 67,662 58,320 Total liabilities $133,791 $108,800 Common stock 183,793 178,440 Retained Earnings 62,075 40,000 Total common equity $245,868 $218,440 Total liabilities and equity $379,659 $327,240 Joshua & White Technologies December 31 Income Statements (Thousands of Dollars) 2016 2015 Sales $420,000 $400,000 COGS except excluding depr. and amort. 300,000 298,000 Depreciation and Amortization 19,660 18,000 Other operating expenses 27,600 22,000 EBIT $72,740 $62,000 Interest Expense 5,740 4,460 EBT $67,000 $57,540 Taxes (40%) 26,800 23,016 Net Income $40,200 $34,524 Common dividends $18,125 $17,262 Addition to retained earnings $22,075 $17,262 Other Data 2016 2015 Year-end Stock Price $90.00 $96.00 # of shares (Thousands) 4,052 4,000 Lease payment (Thousands of Dollars) $20,000 $20,000 Sinking fund payment (Thousands of Dollars) $5,000 $5,000 Ratio Analysis 2016 2015 Industry Avg Liquidity Ratios Current Ratio 2.58 Quick Ratio 1.53 Asset Management Ratios Inventory Turnover (Total COGS/Inventories) 7.69 Days Sales Outstanding 47.45 Fixed Assets Turnover 2.04 Total Assets Turnover 1.23 Debt Management Ratios Debt Ratio (Total debt-to-assets) 20.0% Liabilities-to-assets ratio 32.1% Times-interest-earned ratio 15.33 EBITDA coverage ratio 4.18 Profitability Ratios Profit Margin 8.86% Basic Earning Power 19.48% Return on Assets 10.93% Return on Equity 16.10% Market Value Ratios Earnings per share NA Price-to-earnings ratio 10.65 Cash flow per share NA Price-to-cash flow ratio 7.11 Book Value per share NA Market-to-book ratio 1.72 a. Has Joshua & White's liquidity position improved or worsened? Explain. b. Has Joshua & White's ability to manage its assets improved or worsened? Explain. c. How has Joshua & White's profitability changed during the last year? d. Perform an extended Du Pont analysis for Joshua & White for 2008 and 2009. ROE = PM x TA Turnover x Equity Multiplier 2016 2015 e. Perform a common size analysis. What has happened to the composition (that is, percentage in each category) of assets and liabilities? Common Size Balance Sheets Assets 2016 2015 Cash and cash equivalents Short-term investments Accounts Receivable Inventories Total current assets Net fixed assets Total assets Liabilities and equity 2016 2015 Accounts payable Accruals Notes payable Total current liabilities Long-term debt Total liabilities Common stock Retained Earnings Total common equity Total liabilities and equity Common Size Income Statements 2016 2015 Sales COGS except excluding depr. and amort. Depreciation and Amortization Other operating expenses EBIT Interest Expense EBT Taxes (40%) Net Income f. Perform a percent change analysis. What does this tell you about the change in profitability and asset utilization? Percent Change Balance Sheets Base Assets 2016 2015 Cash and cash equivalents Short-term investments Accounts Receivable Inventories Total current assets Net fixed assets Total assets Base Liabilities and equity 2016 2015 Accounts payable Accruals Notes payable Total current liabilities Long-term debt Total liabilities Common stock Retained Earnings Total common equity Total liabilities and equity Base Percent Change Income Statements 2016 2015 Sales COGS except excluding depr. and amort. Depreciation and Amortization Other operating expenses EBIT Interest Expense EBT Taxes (40%) Net IncomeExplanation / Answer
THE GIVEN QUESTION IS TOO LENGTHY AS PER THE ALLOTED TIME. I HAVE TRIED MY BEST TO ANSWER 80% OF THE QUESTION. HOPE THIS WAS HELPFUL :)
Please fill in all yellow Squares with the appropriate answer.
Joshua & White Technologies: December 31 Balance Sheets
(Thousands of Dollars)
Assets
2016
2015
Cash and cash equivalents
$21,000
$20,000
Short-term investments
3,759
3,240
Accounts Receivable
52,500
48,000
Inventories
84,000
56,000
Total current assets
$161,259
$127,240
Net fixed assets
218,400
200,000
Total assets
$379,659
$327,240
Liabilities and equity
Accounts payable
$33,600
$32,000
Accruals
12,600
12,000
Notes payable
19,929
6,480
Total current liabilities
$66,129
$50,480
Long-term debt
67,662
58,320
Total liabilities
$133,791
$108,800
Common stock
183,793
178,440
Retained Earnings
62,075
40,000
Total common equity
$245,868
$218,440
Total liabilities and equity
$379,659
$327,240
Joshua & White Technologies December 31 Income Statements
(Thousands of Dollars)
2016
2015
Sales
$420,000
$400,000
COGS except excluding depr. and amort.
300,000
298,000
Depreciation and Amortization
19,660
18,000
Other operating expenses
27,600
22,000
EBIT
$72,740
$62,000
Interest Expense
5,740
4,460
EBT
$67,000
$57,540
Taxes (40%)
26,800
23,016
Net Income
$40,200
$34,524
Common dividends
$18,125
$17,262
Addition to retained earnings
$22,075
$17,262
Other Data
2016
2015
Year-end Stock Price
$90.00
$96.00
# of shares (Thousands)
4,052
4,000
Lease payment (Thousands of Dollars)
$20,000
$20,000
Sinking fund payment (Thousands of Dollars)
$5,000
$5,000
Ratio Analysis
2016
2015
Industry Avg
Liquidity Ratios
Current Ratio
2.44
2.52
2.58
Quick Ratio
1.17
1.41
1.53
Asset Management Ratios
Inventory Turnover (Total COGS/Inventories)
5
7.14
7.69
Days Sales Outstanding
45.61
44
47.45
Fixed Assets Turnover
1.92
2
2.04
Total Assets Turnover
1.11
1.22
1.23
Debt Management Ratios
Debt Ratio (Total debt-to-assets)
27.20%
24.90%
20.0%
Liabilities-to-assets ratio
35.23%
33%
32.1%
Times-interest-earned ratio
12.67
13.90
15.33
EBITDA coverage ratio
3.66
3.39
4.18
Profitability Ratios
Profit Margin
9.57
8.63
8.86%
Basic Earning Power
19.16%
18.95%
19.48%
Return on Assets
10.58%
10.55%
10.93%
Return on Equity
(Taking additions to retained earnings into considerations)
15%
14.64
16.10%
Market Value Ratios
Earnings per share
5.44
4.32
NA
Price-to-earnings ratio
16.54
22.22
10.65
Cash flow per share
22.80
20
NA
Price-to-cash flow ratio
3.95
4.8
7.11
Book Value per share
126.80
113.54
NA
Market-to-book ratio
0.71
0.85
1.72
a. Has Joshua & White's liquidity position improved or worsened? Explain.
Joshua & White's liquidity position has worsened from the year 2015. Liquidity position of a firm is measured by current ratio and quick ratio both of which has declined in the year 2016 as compared to the year 2015.
b. Has Joshua & White's ability to manage its assets improved or worsened? Explain.
Joshua & White's ability to manage its assets has worsened from the year 2015. Management of assets in a firm is measured by asset management ratios. In the year 2016 as compared to 2015 all the asset management ratio have declined and no were close to industry average thus signalling poor management of its assets.
c. How has Joshua & White's profitability changed during the last year?
Profitability position of Joshua and White has increased in 2016 when compared to last year that is 2015 which is clearly reflected in the profitability ratios mentioned above.
d. Perform an extended Du Pont analysis for Joshua & White for 2008 and 2009.
ROE =
PM x
TA Turnover x Equity Multiplier
2016
15
9.57
1.11
1.42
2015
14.64
8.63
1.22
1.39
e. Perform a common size analysis. What has happened to the composition
(that is, percentage in each category) of assets and liabilities?
Common Size Balance Sheets
Assets
2016
2015
Cash and cash equivalents
13.02
15.72
Short-term investments
2.33
2.55
Accounts Receivable
32.56
37.72
Inventories
52.09
44.01
Total current assets
100/42.47
100/38.88
Net fixed assets
57.53
61.12
Total assets
100
100
Liabilities and equity
2016
2015
Accounts payable
50.81
63.39
Accruals
19.05
23.77
Notes payable
30.14
12.84
Total current liabilities
100/49.43
100/46.40
Long-term debt
50.57
53.60
Total liabilities
100
100
Common stock
Retained Earnings
Total common equity
Total liabilities and equity
Common Size Income Statements
2016
2015
Sales
COGS except excluding depr. and amort.
Depreciation and Amortization
Other operating expenses
EBIT
Interest Expense
EBT
Taxes (40%)
Net Income
f. Perform a percent change analysis. What does this tell you about the change in profitability
and asset utilization?
Percent Change Balance Sheets
Base
Assets
2016
2015
Cash and cash equivalents
Short-term investments
Accounts Receivable
Inventories
Total current assets
Net fixed assets
Total assets
Base
Liabilities and equity
2016
2015
Accounts payable
Accruals
Notes payable
Total current liabilities
Long-term debt
Total liabilities
Common stock
Retained Earnings
Total common equity
Total liabilities and equity
Base
Percent Change Income Statements
2016
2015
Sales
COGS except excluding depr. and amort.
Depreciation and Amortization
Other operating expenses
EBIT
Interest Expense
EBT
Taxes (40%)
Net Income
Joshua & White Technologies: December 31 Balance Sheets
(Thousands of Dollars)
Assets
2016
2015
Cash and cash equivalents
$21,000
$20,000
Short-term investments
3,759
3,240
Accounts Receivable
52,500
48,000
Inventories
84,000
56,000
Total current assets
$161,259
$127,240
Net fixed assets
218,400
200,000
Total assets
$379,659
$327,240
Liabilities and equity
Accounts payable
$33,600
$32,000
Accruals
12,600
12,000
Notes payable
19,929
6,480
Total current liabilities
$66,129
$50,480
Long-term debt
67,662
58,320
Total liabilities
$133,791
$108,800
Common stock
183,793
178,440
Retained Earnings
62,075
40,000
Total common equity
$245,868
$218,440
Total liabilities and equity
$379,659
$327,240
Joshua & White Technologies December 31 Income Statements
(Thousands of Dollars)
2016
2015
Sales
$420,000
$400,000
COGS except excluding depr. and amort.
300,000
298,000
Depreciation and Amortization
19,660
18,000
Other operating expenses
27,600
22,000
EBIT
$72,740
$62,000
Interest Expense
5,740
4,460
EBT
$67,000
$57,540
Taxes (40%)
26,800
23,016
Net Income
$40,200
$34,524
Common dividends
$18,125
$17,262
Addition to retained earnings
$22,075
$17,262
Other Data
2016
2015
Year-end Stock Price
$90.00
$96.00
# of shares (Thousands)
4,052
4,000
Lease payment (Thousands of Dollars)
$20,000
$20,000
Sinking fund payment (Thousands of Dollars)
$5,000
$5,000
Ratio Analysis
2016
2015
Industry Avg
Liquidity Ratios
Current Ratio
2.44
2.52
2.58
Quick Ratio
1.17
1.41
1.53
Asset Management Ratios
Inventory Turnover (Total COGS/Inventories)
5
7.14
7.69
Days Sales Outstanding
45.61
44
47.45
Fixed Assets Turnover
1.92
2
2.04
Total Assets Turnover
1.11
1.22
1.23
Debt Management Ratios
Debt Ratio (Total debt-to-assets)
27.20%
24.90%
20.0%
Liabilities-to-assets ratio
35.23%
33%
32.1%
Times-interest-earned ratio
12.67
13.90
15.33
EBITDA coverage ratio
3.66
3.39
4.18
Profitability Ratios
Profit Margin
9.57
8.63
8.86%
Basic Earning Power
19.16%
18.95%
19.48%
Return on Assets
10.58%
10.55%
10.93%
Return on Equity
(Taking additions to retained earnings into considerations)
15%
14.64
16.10%
Market Value Ratios
Earnings per share
5.44
4.32
NA
Price-to-earnings ratio
16.54
22.22
10.65
Cash flow per share
22.80
20
NA
Price-to-cash flow ratio
3.95
4.8
7.11
Book Value per share
126.80
113.54
NA
Market-to-book ratio
0.71
0.85
1.72
a. Has Joshua & White's liquidity position improved or worsened? Explain.
Joshua & White's liquidity position has worsened from the year 2015. Liquidity position of a firm is measured by current ratio and quick ratio both of which has declined in the year 2016 as compared to the year 2015.
b. Has Joshua & White's ability to manage its assets improved or worsened? Explain.
Joshua & White's ability to manage its assets has worsened from the year 2015. Management of assets in a firm is measured by asset management ratios. In the year 2016 as compared to 2015 all the asset management ratio have declined and no were close to industry average thus signalling poor management of its assets.
c. How has Joshua & White's profitability changed during the last year?
Profitability position of Joshua and White has increased in 2016 when compared to last year that is 2015 which is clearly reflected in the profitability ratios mentioned above.
d. Perform an extended Du Pont analysis for Joshua & White for 2008 and 2009.
ROE =
PM x
TA Turnover x Equity Multiplier
2016
15
9.57
1.11
1.42
2015
14.64
8.63
1.22
1.39
e. Perform a common size analysis. What has happened to the composition
(that is, percentage in each category) of assets and liabilities?
Common Size Balance Sheets
Assets
2016
2015
Cash and cash equivalents
13.02
15.72
Short-term investments
2.33
2.55
Accounts Receivable
32.56
37.72
Inventories
52.09
44.01
Total current assets
100/42.47
100/38.88
Net fixed assets
57.53
61.12
Total assets
100
100
Liabilities and equity
2016
2015
Accounts payable
50.81
63.39
Accruals
19.05
23.77
Notes payable
30.14
12.84
Total current liabilities
100/49.43
100/46.40
Long-term debt
50.57
53.60
Total liabilities
100
100
Common stock
Retained Earnings
Total common equity
Total liabilities and equity
Common Size Income Statements
2016
2015
Sales
COGS except excluding depr. and amort.
Depreciation and Amortization
Other operating expenses
EBIT
Interest Expense
EBT
Taxes (40%)
Net Income
f. Perform a percent change analysis. What does this tell you about the change in profitability
and asset utilization?
Percent Change Balance Sheets
Base
Assets
2016
2015
Cash and cash equivalents
Short-term investments
Accounts Receivable
Inventories
Total current assets
Net fixed assets
Total assets
Base
Liabilities and equity
2016
2015
Accounts payable
Accruals
Notes payable
Total current liabilities
Long-term debt
Total liabilities
Common stock
Retained Earnings
Total common equity
Total liabilities and equity
Base
Percent Change Income Statements
2016
2015
Sales
COGS except excluding depr. and amort.
Depreciation and Amortization
Other operating expenses
EBIT
Interest Expense
EBT
Taxes (40%)
Net Income
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