1 Balance Sheet: Assets (Millions of Dollars) 2 3 Assets (million $) 4 Cash 5 S-T investment 6 Accounts receivable 7 Inventories 8 Total current assets (CA) 9 Gross fixed assets (FA) 10 Less: Depreciation 11 Net FA 12 Total assets 13 14 15 16 17 Liabilities and Equity (million $) 18 Accounts payable (A/P) 19 Notes payable 20 Accruals 21 Total current liabilities (CL) 22 Long-term dept 23 Total liabilities 24 Common Stock 25 Retained earnings 26 Total equity 27 Total L&E 28 29 30 31 32 Income Statement (Millions of Dollars) 33 34 35 (million $) 36 Sales 37 COGS 38 Depreciation 39 Other expenses 40 Tot. op. costs 41 EBIT 2039 5,500 4500 300 350 X x X x X x x 2039 80 120 420 600 4000 1000 2039 340 50 300 800 1200 1730 G 2040 6,000 5000 350 420 X x x X X x 2040 70 20 540 800 4820 1320 2040 440 250 340 1100 1200 1910 Background Assumptions Tax Rate Interest rate on short-term debt Interest rate on long-term debt Forecasted Sales (2041) Forecasted L-T growth rate Constant dividend policy x x x 25% 4.00% 9% Notes Business Plan For Next Year (2041) 1) Accounts cleanup for efficency: Short-term investemnt and NP will net out 2) A new cost saving plan: COGS/Sales-70%. Other expenses 4% 3) No expansion: FA, depreciation and Net FA will not change
1 Balance Sheet: Assets (Millions of Dollars) 2 3 Assets (million $) 4 Cash 5 S-T investment 6 Accounts receivable 7 Inventories 8 Total current assets (CA) 9 Gross fixed assets (FA) 10 Less: Depreciation 11 Net FA 12 Total assets 13 14 15 16 17 Liabilities and Equity (million $) 18 Accounts payable (A/P) 19 Notes payable 20 Accruals 21 Total current liabilities (CL) 22 Long-term dept 23 Total liabilities 24 Common Stock 25 Retained earnings 26 Total equity 27 Total L&E 28 29 30 31 32 Income Statement (Millions of Dollars) 33 34 35 (million $) 36 Sales 37 COGS 38 Depreciation 39 Other expenses 40 Tot. op. costs 41 EBIT 2039 5,500 4500 300 350 X x X x X x x 2039 80 120 420 600 4000 1000 2039 340 50 300 800 1200 1730 G 2040 6,000 5000 350 420 X x x X X x 2040 70 20 540 800 4820 1320 2040 440 250 340 1100 1200 1910 Background Assumptions Tax Rate Interest rate on short-term debt Interest rate on long-term debt Forecasted Sales (2041) Forecasted L-T growth rate Constant dividend policy x x x 25% 4.00% 9% Notes Business Plan For Next Year (2041) 1) Accounts cleanup for efficency: Short-term investemnt and NP will net out 2) A new cost saving plan: COGS/Sales-70%. Other expenses 4% 3) No expansion: FA, depreciation and Net FA will not change
Chapter10: Financial Statements And Reports
Section: Chapter Questions
Problem 3.5C
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Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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