MUST have THE COMPUTATIONS SUPPORTING FINAL ANSWER
1. Following is the balance sheet for Sullivan Hotels Corporation as of December 31, 2018. In 2018, the corporation generated a net income of $430,000. Answer the following questions using this information and the financial statement below.
A. Calculate the earnings per share in 2018.
B. Assume that on January 1, 2019, Sullivan Corporation’s only transactions were to issue 300,000 shares of $1 par value common stock for a market price of $10 per share. On the next day, 50 percent of the proceeds were used to immediately pay down the long-term debt, 25 percent of the proceeds were used to immediately buy fixed assets, and the remainder was deposited in the corporation’s cash bank account. Compile the balance sheet after the new stock issue (Note that the value of the sale of stock more than par value is accounted for in “Paid-in-Capital”).
C. Assume that Sullivan Corporation generates a net income of $450,000 in 2019 (after the new stock issue). Calculate the new earnings per share.
SULLIVAN HOTELS CORPORATION
Balance Sheet; January 02,2019
Cu
ent Assets
Cu
ent Liabilities
Cash
$ 50,000
Wages Payable
$ 30,000
Marketable Securities
XXXXXXXXXX,000
Accounts Payable
XXXXXXXXXX,000
Accounts Receivable
XXXXXXXXXX,000
Notes Payable
XXXXXXXXXX,000
Inventory
XXXXXXXXXX,000
Total Cu
ent Liabilities
$ 105,000
Prepaid Expenses
XXXXXXXXXX,000
Total Cu
ent Assets
$ 195,000
Long-term Debt
Mortgage and LT Loans
$2,500,000
Fixed Assets
Total Long-term Debt
$2,500,000
Net Fixed Assets
$7,000,000
Total Fixed Assets
$7,000,000
Owners’ Equity
Common Stock (3,000,000 shares ($1 par))
$3,000,000
Paid in Capital in excess of pa
XXXXXXXXXX,000
Retained Earnings
1,090,000
Total Owners’ Equity
$4,590,000
Total Assets
$7,195,000
Total Liabilities and Owner’s Equity
$7,195,000
2. Financial Statement Analysis of New Venture Fitness Drinks. Use the 2014, 2013, and 2012 consolidated financial statements of New Venture Fitness Drinks, Inc. It is provided as a PDF file on the website. Included are the Consolidated Balance Sheets (for the years ended 2014, 2013 & 2012), Consolidated Income Statements for the years ended 2014, 2013, & 2012), and the Consolidated Statements of Cash Flows (for the years ended 2014 & 2013).
A. Vertical Analysis and Horizontal Analyses. Conduct the following and write a summary of findings related to these Analyses. If you notice something of particular interest in the Vertical Analysis, refer to the Horizontal Analysis that supports or explains that finding (and visa-versa).
1. Vertical Analysis of the Balance Sheet using Total Assets as constant for 2014 and 2013
2. Vertical Analysis of the Income Statement using Total Revenues as constant for 2014 and 2013
3. Horizontal Analysis of the Balance Sheet for the change between 2014 & 2013, AND between 2013 & 2012
4. Horizontal Analysis of the Income Statement for the change between 2014 & 2013 AND between 2013 & 2012.
B. Ratio Analysis for 2014 and XXXXXXXXXXCompute the following ratios for New Venture for 2014 and 2013 and describe what each ratio says about the business AND discuss what changes, if any, across the two years say about the business. To complete some of the ratios, you will need the following information. For each ratio, include in your answer a
ief discussion of each ratio, and also any differences in conclusions the two ratios suggest).
a. Assume 65% of “Net Sales” is credit sales for 2014.
. Assume 70% of “Net Sales” is credit sales for 2013.
c. Assume 80% of “Net Sales” is credit sales for 2012.
d. Assume there is NO prefe
ed stock or dividends.
1. Liquidity Ratios
· Cu
ent Ratio
· Quick Ratio
2. Activity Ratios
· Accounts Receivable Turnover Ratio
· Average collection period
· Total Assets Turnover Ratio
3. Leverage Ratios
· Debt-to-Equity Ratio
· Debt-to-Total Assets Ratio
· Times-Interest-Earned Ratio
4. Profitability Ratios
· Operating Profit Margin Ratio
· Net Profit Margin Ratio
· Operating Return on Assets Ratio
· Return on Equity Ratio
5. Market Ratios
· Earnings per Common Share Ratio
· Operating Cash Flow per Share Ratio
· Free Cash Flow per Share Ratio
3. You run a business in Fort Collins, Colorado manufacturing custom replicas of new and old Harley-Davidson, Triumph, BMW, and Indian Motorcycles. These replicas are all approximately 6 inches long and 3 – 4 inches high. You travel to motorcycle rallies around the country throughout the year selling these attractive replicas. Each replica takes 1½ hours to produce, has a sales price of $25.00, raw materials for the replica are $5.00, and production labor is paid $8.00 per hour. Operating expenses are as follow: Salaries $3,000 per week; insurance is $1,500 per quarter; rent is $4,000 per month; and utilities are $1,200 per month.
A. How many motorcycle replica units must you sell each month in order to
eak-even?
B. How many dollars in sales does this represent?
C. What is the contribution margin for each replica sold?
D. If the goal is to make $10,000 profit each month, how many replicas must you sell?
4. Using the a
eviated income statement below for Wiley’s Outdoor Gear Corp. do the following:
A. Calculate the earnings per share
B. Calculate the degree of operating leverage (DOL)
C. Calculate the degree of financial leverage (DFL)
D. Calculate the degree of combined leverage (DCL)
E. Explain what DOL, DFL, and DCL mean
F. Discuss the results of your computations and what you think they say about Wiley’s Corporation
Wiley’s Outdoor Gear Corp.
A
eviated Income Statement
12/31/19
12/31/18
Total Sales Revenue
$2,386,444
$1,300,933
Cost of Goods Sold
XXXXXXXXXX,091
XXXXXXXXXX,119
Gross Profit
$1,898,353
$ 972,814
Operating Expenses
XXXXXXXXXX,855
XXXXXXXXXX,623
Operating Income
$1,826,498
$ 926,191
Interest and Taxes
XXXXXXXXXX,422
XXXXXXXXXX,165
Net Income
$1,198,076
$ 579,026
Common Shares of stock: 200,000 shares outstanding
5. Using the Balance Sheet for Wanderlust Travel Excursions and Memories business shown below, do the following.
A. Create a Pro Forma Balance Sheet for the following year using the percentage of sales method.
B. If next year’s sales forecast increases to $425,000, profit margin is 12%, and the owner payout ratio is 85%, what is required in new financing?
Wanderlust Travel Excursion and Memories
Pro Forma Balance Sheet
Total Sales Cu
ent Year $275,000
Percentage of Sales (%)
Forecast Sales Next Year $350,000
Assets
Cu
ent Assets
Cash
$ 5,694
Accounts Receivable
19,662
Inventory
3,381
Total Cu
ent Assets
$28,737
Fixed Assets
Furniture and Fixtures
$ 5,595
Transportation Equipment
25,456
Total Fixed Assets
$31,051
Total Assets
$59,788
Liabilities and Owners’ Equity
Cu
ent Liabilities
Notes Payable
$ 15,456
Accrued Taxes Payable
3,598
Total Cu
ent Liabilities
$ 19,054
Long Term Debt
18,654
Total Liabilities
$ 37,708
Owner’s Equity
22,080
Total Liabilities and Owner’s Equity
$ 59,788
6. The table below provides a list of sales figures for the previous year XXXXXXXXXXfor your mountain resort, which experiences consistent visitation throughout the year. You want to project a forecast for January of the following year XXXXXXXXXXYou want to select from 3 models to make your forecast: 1) a 3-month moving average; 2) a weighted moving average (you believe your weights should be 0.2, 0.3, & 0.5); and 3) an exponential smoothing model in which will use an = 0.2. Your forecast for January 2019 was $32,000.
A. Construct a table that shows each of these forecasts for the cu
ent year and provide the forecast for January of this coming year.
B. Using the data given, and your forecasts, which model do you think is the best model for your business? Why?
Month
Previous Year Sales in $
January 2019
$32,645
Fe
uary 2019
$31,456
March 2019
$30,270
April 2019
$33,129
May 2019
$34,456
June 2019
$35,256
July 2019
$36,218
August 2019
$35,456
September 2019
$34,250
October 2019
$32,156
November 2019
$30,125
December 2019
$32,275