alculate the projected inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. Explain how Computron utilization of assets stack up against that of other firms in its industry. Computron's Balance Sheets (Millions of Dollars) 2019 2020 Assets Cash and equivalents $ 60 $ 50 Short-term investments 100 10 Accounts receivable 400 520 Inventories 620 820 Total current assets $ 1,180 $ 1,400 Gross fixed assets $ 3,900 $ 4,820 Less: Accumulated depreciation 1,000 1,320 Net fixed assets $ 2,900 $ 3,500 Total assets $ 4,080 $ 4,900 Liabilities and equity Accounts payable $ 300 $ 400 Notes payable 50 250 Accruals 200 240 Total current liabilities $ 550 $ 890 Long-term bonds 800 1,100 Total liabilities $ 1,350 $ 1,990 Common stock 1,000 1,000 Retained earnings 1,730 1,910 Total equity $ 2,730 $ 2,910 Total liabilities and equity $ 4,080 $ 4,900 Computron's Income Statement (Millions of Dollars) 2019 2020 Net sales $ 5,500 $ 6,000 Cost of goods sold (Excluding depr. & amort.) 4,300 4,800 Depreciation and amortizationa 290 320 Other operating expenses 350 420 Total operating costs $ 4,940 $ 5,540 Earnings before interest and taxes (EBIT) $ 560 $ 460 Less interest 68 108 Pre-tax earnings $ 492 $ 352 Taxes (25%) 123 88 Net Income $ 369 $ 264 Notes: a Computron has no amortization charges. Other Data 2020 2019 Stock price $57.00 $40.00 Shares outstanding (millions) 100 100 Common dividends (millions) $90 $84 Tax rate 25% 25% Weighted average cost of capital (WACC) 10.00% 10.00% Computron's Statement of Cash Flows (Millions of Dollars)
alculate the projected inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. Explain how Computron utilization of assets stack up against that of other firms in its industry. Computron's Balance Sheets (Millions of Dollars) 2019 2020 Assets Cash and equivalents $ 60 $ 50 Short-term investments 100 10 Accounts receivable 400 520 Inventories 620 820 Total current assets $ 1,180 $ 1,400 Gross fixed assets $ 3,900 $ 4,820 Less: Accumulated depreciation 1,000 1,320 Net fixed assets $ 2,900 $ 3,500 Total assets $ 4,080 $ 4,900 Liabilities and equity Accounts payable $ 300 $ 400 Notes payable 50 250 Accruals 200 240 Total current liabilities $ 550 $ 890 Long-term bonds 800 1,100 Total liabilities $ 1,350 $ 1,990 Common stock 1,000 1,000 Retained earnings 1,730 1,910 Total equity $ 2,730 $ 2,910 Total liabilities and equity $ 4,080 $ 4,900 Computron's Income Statement (Millions of Dollars) 2019 2020 Net sales $ 5,500 $ 6,000 Cost of goods sold (Excluding depr. & amort.) 4,300 4,800 Depreciation and amortizationa 290 320 Other operating expenses 350 420 Total operating costs $ 4,940 $ 5,540 Earnings before interest and taxes (EBIT) $ 560 $ 460 Less interest 68 108 Pre-tax earnings $ 492 $ 352 Taxes (25%) 123 88 Net Income $ 369 $ 264 Notes: a Computron has no amortization charges. Other Data 2020 2019 Stock price $57.00 $40.00 Shares outstanding (millions) 100 100 Common dividends (millions) $90 $84 Tax rate 25% 25% Weighted average cost of capital (WACC) 10.00% 10.00% Computron's Statement of Cash Flows (Millions of Dollars)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
- Calculate the projected inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. Explain how Computron utilization of assets stack up against that of other firms in its industry.
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Computron's |
||
| 2019 | 2020 | |
| Assets | ||
| Cash and equivalents | $ 60 | $ 50 |
| Short-term investments | 100 | 10 |
| 400 | 520 | |
| Inventories | 620 | 820 |
| Total current assets | $ 1,180 | $ 1,400 |
| Gross fixed assets | $ 3,900 | $ 4,820 |
| Less: |
1,000 | 1,320 |
| Net fixed assets | $ 2,900 | $ 3,500 |
| Total assets | $ 4,080 | $ 4,900 |
| Liabilities and equity | ||
| Accounts payable | $ 300 | $ 400 |
| Notes payable | 50 | 250 |
| Accruals | 200 | 240 |
| Total current liabilities | $ 550 | $ 890 |
| Long-term bonds | 800 | 1,100 |
| Total liabilities | $ 1,350 | $ 1,990 |
| Common stock | 1,000 | 1,000 |
| 1,730 | 1,910 | |
| Total equity | $ 2,730 | $ 2,910 |
| Total liabilities and equity | $ 4,080 | $ 4,900 |
| Computron's Income Statement (Millions of Dollars) | 2019 | 2020 |
| Net sales | $ 5,500 | $ 6,000 |
| Cost of goods sold (Excluding depr. & amort.) | 4,300 | 4,800 |
| Depreciation and amortizationa | 290 | 320 |
| Other operating expenses | 350 | 420 |
| Total operating costs | $ 4,940 | $ 5,540 |
| Earnings before interest and taxes (EBIT) | $ 560 | $ 460 |
| Less interest | 68 | 108 |
| Pre-tax earnings | $ 492 | $ 352 |
| Taxes (25%) | 123 | 88 |
| Net Income | $ 369 | $ 264 |
| Notes: | ||
| a Computron has no amortization charges. | ||
| Other Data | 2020 | 2019 |
| Stock price | $57.00 | $40.00 |
| Shares outstanding (millions) | 100 | 100 |
| Common dividends (millions) | $90 | $84 |
| Tax rate | 25% | 25% |
| Weighted average cost of capital (WACC) | 10.00% | 10.00% |
|
Computron's Statement of
|
||
| 2020 | ||
| Operating Activities | ||
| Net Income before preferred dividends | $ 264 | |
| Noncash adjustments | ||
| Depreciation and amortization | 320 | |
| Due to changes in |
||
| Change in accounts receivable | (120) | |
| Change in inventories | (200) | |
| Change in accounts payable | 100 | |
| Change in accruals | 40 | |
| Net cash provided by operating activities | $ 404 | |
| Investing activities | ||
| Cash used to acquire fixed assets | $ (920) | |
| Change in short-term investments | 90 | |
| Net cash provided by investing activities | $ (830) | |
| Financing Activities | ||
| Change in notes payable | $ 200 | |
| Change in long-term debt | 300 | |
| Payment of cash dividends | (84) | |
| Net cash provided by financing activities | $ 416 | |
| Net change in cash and equivalents | $ (10) | |
| Cash and securities at beginning of the year | 60 | |
| Cash and securities at end of the year | $ 50 | |
| Table 2A-1 | ||||
| Individual Tax Table | ||||
| If an individual's | He/she pays this | Plus this percentage | Average tax | |
| taxable income | amount on the | on the excess | rate at | |
| is between: | base of the bracket | over the base | top of bracket | |
| (1) | (2) | (3) | (4) | (5) |
| $0 | $9,525 | $0.00 | 10.0% | 10.0% |
| $9,525 | $38,700 | $952.50 | 12.0% | 11.5% |
| $38,700 | $82,500 | $4,453.50 | 22.0% | 17.1% |
| $82,500 | $157,500 | $14,089.50 | 24.0% | 20.4% |
| $157,500 | $200,000 | $32,089.50 | 32.0% | 22.8% |
| $200,000 | $500,000 | $45,689.50 | 35.0% | 30.1% |
| $500,000 | and up | $150,689.50 | 37.0% | 37.0% |
|
Married (Joint Return) Tax Table
|
||||
| If a couple's | It pays this | Plus this percentage | Average tax | |
| taxable income | amount on the | on the excess | rate at | |
| is between: | base of the bracket | over the base | top of bracket | |
| (1) | (2) | (3) | (4) | (5) |
| $0 | $19,050 | $0.00 | 10.0% | 10.0% |
| $19,050 | $77,400 | $1,905.00 | 12.0% | 11.5% |
| $77,400 | $165,000 | $8,907.00 | 22.0% | 17.1% |
| $165,000 | $315,000 | $28,179.00 | 24.0% | 20.4% |
| $315,000 | $400,000 | $64,179.00 | 32.0% | 22.8% |
| $400,000 | $600,000 | $91,379.00 | 35.0% | 26.9% |
| $600,000 | and up | $161,379.00 | 37.0% | 37.0% |
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