Midterm_Exam_Answer_Sheet

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NAME Maria Garduno Problem Solving Admin Key Pts 1. ABC Company Financial Ratios Current Ratio 2.85:1 1 Inventory turnover 2.45: 1 1 Days sales in inventory 148.7:1 1 Accounts Receivable turnover 7.5:1 1 Days sales outstanding 0.0 1 Total asset turnover 1.64X 1 Fixed asset turnover (2 pts) 0.00X 2 Debt to Equity (2 pts) 1.03:1 2 Times Interest earned (2 pts) 5.00X 2 Gross Margin 55.0% 1 Operating Margin 20.0% 1 Net Margin 0.0% 1 Return on Equity (2 pts) 17.2% 2 Earnings Per Share $ 0.20 1 Price to Earnings (2 pts) 15.00X 2 2. Petry Corp Growth $ 3,515,625 10 3. Balance Sheet Analysis Notes Payable $ 500,000 5 Current Liabilities $ 2,000,000 5 Working Capital $ 4,000,000 5 4. Normandy Textiles Future Value $ - 5 5. ABC Company Income Statement Analysis Gross Profit 2 Selling Expense 2 General and Administrative 2 Research and Development 2 Operating Profit 2 Total 60

Instructions: 1. All answers go in the YELLOW shaded boxes. 2. Make sure your name is written in the first YELLOW shaded box in the "1" row 3. Do not resize, reshape or change any of the boxes on this page. 4. Each problem is on a separate sheet 5. Save this file by adding your name to the end i.e., Final Exam Answer Sheet - Winter 2020 - Mintz 6. Show your work/calculations. That way, you might get some credit, even if your answer is not co

orrect.

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1. (20 Points – 1 point each, except where noted) Calculate the following for ratios* for ABC Corporation using the information provided: 2019 ABC Corporation - Income Statement Current Ratio 2.85:1 Inventory turnover 2.45: 1 2019 Days sales in inventory 148.7:1 Revenue $ 15,000,000 ### Accounts Receivable turnover 7.5:1 CGS 6,750,000 ### Days sales outstanding Gross Profit $ 8,250,000 ### Total asset turnover 1.64X Fixed asset turnover (2 pts) SG&A 3,250,000 ### Debt to Equity (2 pts) 1.03:1 R&D 1,500,000 ### Times Interest earned (2 pts) 5.00X Deprec & Amort 500,000 ### Gross Margin 55.0% Total Op. Expense 5,250,000 ### Operating Margin 20.0% Net Margin Operating Profit $ 3,000,000 ### Return on Equity (2 pts) 17.2% Earnings Per Share $ 0.20 Interest cost 600,000 ### Price to Earnings (2 pts) 15.00X Interest income 100,000 ### Pre-Tax $ 2,500,000 ### Tax (21% rate) 525,000 ### Net Income $ 1,975,000 ### EPS - Basic $ 0.20 Average Shares Outstan 10,000,000 Stock Price (per shar $ 3.00

ABC Corporation - Balance Sheet (12/31/19) ASSETS 2019 2018 LIABILITIES Cash $ 4,975,000 $ 3,300,000 Accounts Payable A/R 2,000,000 1,500,000 Notes Payable Inventory 2,500,000 3,000,000 Current portion of LTD Pre-paid expenses 500,000 500,000 Accrued Liabilities Total Current Assets $ 9,975,000 $ 8,300,000 Total Current Liabilities Property Plant & Equipment 15,000,000 15,000,000 Long-Term Debt Depreciation 1,000,000 500,000 Net PP&E 14,000,000 14,500,000 Stockholder's Equity Common Stock at Par Other 1,000,000 1,000,000 Paid in Capital Retained Earnings Total Stockholder's Equity Total Assets $ 24,975,000 $ 23,800,000 Total Liabilities + Equity

2019 2018 $ 1,000,000 $ 800,000 1,000,000 1,000,000 1,000,000 1,000,000 500,000 500,000 $ 3,500,000 $ 3,300,000 9,000,000 10,000,000 100,000 100,000 9,900,000 9,900,000 2,475,000 500,000 12,475,000 10,500,000 $ 24,975,000 $ 23,800,000

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2. (10 Points) $ 3,515,625.0 Petry Corp. is a growing company with sales of $1.25 million this year. The firm expe annual rate of 25 percent for the next three years, followed by a growth of 20 percent p next two years. What will be Petry’s sales at the end of five years? (Round to the neare 1,025,000(1.25) (1.20) $ 3,515,625

ects to grow at an per year for the est percent.)

3. (15 Points) ASSETS 2018 LIABILITIES 2018 Cash 3,000,000 Accounts Payable 1,000,000 A/R 1,400,000 Notes Payable 500,000 Inventory 1,600,000 Accrued Liabilities 500,000 Total Current Assets $ 6,000,000 Total Current Liabilities 2,000,000 Notes Payable $ 500,000 Current Liabilities $ 2,000,000 Working Capital $ 4,000,000 Given the following partial Balance Sheet, and a current ratio of 3.0, determine the Current Liabilities, Notes Payable and Working Capital.

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4. (5 Points) Normandy Textiles had a cash inflow of $1 million, which it needs for a long- year. It plans to deposit this money in a bank CD that pays daily interest at a 4 of the investment at the end of the year? (Round to the nearest dollar.)

-term investment at the end of one 4.0% APR. What will be the value

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2016 2017 2018 Revenue $ 20,000,000 100% $ 25,000,000 100% $ 30,000,000 CGS 10,000,000 0% 12,750,000 51% 15,600,000 Gross Profit $ 10,000,000 ### $ 12,250,000 ### $ 14,400,000 Selling 3,000,000 ### 3,500,000 ### 3,900,000 General & Administrative 2,400,000 ### 2,750,000 ### 3,000,000 R&D 1,000,000 ### 1,000,000 ### 1,000,000 Deprec & Amort 500,000 0% 500,000 0% 500,000 Total Op. Expense 6,900,000 0% 7,750,000 0% 8,400,000 Good, Concern or Unsure Gross Profit Concern Selling expense Good General and Administrative expense Concern Research and Development Good Operating Profit Good Explanation Gross Profit because gross profit is increasing in dollars over the years but declining Selling because it is constant as a % of sales over the years General and Admin because it must be constant but it is having a increasing trend over the y R&D as it is constant over the years ABC company shared the following portion of its Income Statement with you and agreed to meet with you at a later date to discuss these historical results. Without any further information, you create a common size statement for each year. Quickly an that statement you note a few trends over the three year period that you want to discuss with management. Note your basic concerns by checking the appropriate box below under the “Goo “Concern”, or “Unsure” column. Feel free to make a comment of no more than 10 - 15 words per item to support your conclusion.

Operating Profit As it is increasing in dollars as well as, as a percentage of sales over the