Computron's Balance Sheets (Millions of Dollars) Projection 2018 2019 2020E Assets Cash and equivalents $ 60 $ 50 $ 60 Short-term investments 100 10 50 Accounts receivable 400 520 530 Inventories 620 820 660 Total current assets $ 1,180 $ 1,400 $ 1,300 Net Fixed Assets 2,900 3,500 3,700 Total Assets $ 4,080 $ 4,900 $ 5,000 Liabilities and equity Accounts payable $ 300 $ 400 $ 330 Notes payable 50 250 100 Accruals 200 240 270 Total current liabilities $ 550 $ 890 $ 700 Long-term bonds 800 1,100 1,100 Total liabilities $ 1,350 $ 1,990 $ 1,800 Common stock (100,000 shares) 1,000 1,000 1,000 Retained earnings 1,730 1,910 2,200 Total common equity $ 2,730 $ 2,910 $ 3,200 Total liabilities and equity $ 4,080 $ 4,900 $ 5,000 Income Statements (Millions of Dollars) Projection 2018 2019 2020E Net sales $ 5,500 $ 6,000 $ 6,600 Cost of goods sold (Excluding depr.) $ 4,300 $ 4,800 $ 5,210 Depreciationa $ 290 $ 320 $ 370 Other operating expenses $ 350 $ 420 $ 400 Earnings before interest and taxes (EBIT) $ 560 $ 460 $ 620 Less interest $ 68 $ 108 $ 100 Pre-tax earnings $ 492 $ 352 $ 520 Taxes (25%) $ 123 $ 88 $ 130 Net Income $ 369 $ 264 $ 390 Notes: a Computron has no amortization charges. Additional Information Projection 2018 2019 2020E Year-end common stock price $50.00 $30.00 $49.00 Shares outstanding (millions) 100 100 100 Common dividends (millions) $90 $84 $100 Tax rate 25% 25% 25% Additions to retained earnings (millions) $279 $180 $290 Lease payments (millions) $20 $20 $20 Per Share Information Projection 2018 2019 2020E EPS $3.69 $2.64 $3.90 DPS $0.90 $0.84 $1.00 Book Value Per Share $27.30 $29.10 $32.00 Ratio Analysis 2018 2019 2020E Industry Average Profit margin 6.7% 4.4% 7.2% Operating profit margin 10.2% 7.7% 10.4% Basic earning power 13.7% 9.4% 15.6% ROA 9.0% 5.4% 10.8% ROE 13.5% 9.1% 15.4% Inventory turnover 7.4 6.2 9.0 Days sales outstanding 26.5 31.6 28.0 Fixed assets turnover 1.9 1.7 3.0 Total assets turnover 1.348 1.224 1.5 Current 2.1 1.6 2.5 Quick 1.0 0.7 1.9 Debt ratio 20.8% 27.6% 15.0% Debt-to-equity ratio 0.31 0.46 0.22 Liabilities-to-assets ratio 33.1% 40.6% 32.0% Earnings multiplier 1.5 1.7 1.5 TIE 8.2 4.3 13.0 EBITDA coverage 9.9 6.3 17.2 Price/earnings (P/E) 13.6 11.4 16.8 Market/book 1.8 1.0 2.7 Calculate the projected debt ratio, debt-to-equity ratio, liabilities-to-assets ratio, times-interest-earned ratio, and EBITDA coverage ratios. Explain how Computron compares with the industry with respect to financial leverage. What can you conclude from these ratios?

Computron's Balance Sheets (Millions of Dollars) Projection 2018 2019 2020E Assets Cash and equivalents $ 60 $ 50 $ 60 Short-term investments 100 10 50 Accounts receivable 400 520 530 Inventories 620 820 660 Total current assets $ 1,180 $ 1,400 $ 1,300 Net Fixed Assets 2,900 3,500 3,700 Total Assets $ 4,080 $ 4,900 $ 5,000 Liabilities and equity Accounts payable $ 300 $ 400 $ 330 Notes payable 50 250 100 Accruals 200 240 270 Total current liabilities $ 550 $ 890 $ 700 Long-term bonds 800 1,100 1,100 Total liabilities $ 1,350 $ 1,990 $ 1,800 Common stock (100,000 shares) 1,000 1,000 1,000 Retained earnings 1,730 1,910 2,200 Total common equity $ 2,730 $ 2,910 $ 3,200 Total liabilities and equity $ 4,080 $ 4,900 $ 5,000 Income Statements (Millions of Dollars) Projection 2018 2019 2020E Net sales $ 5,500 $ 6,000 $ 6,600 Cost of goods sold (Excluding depr.) $ 4,300 $ 4,800 $ 5,210 Depreciationa $ 290 $ 320 $ 370 Other operating expenses $ 350 $ 420 $ 400 Earnings before interest and taxes (EBIT) $ 560 $ 460 $ 620 Less interest $ 68 $ 108 $ 100 Pre-tax earnings $ 492 $ 352 $ 520 Taxes (25%) $ 123 $ 88 $ 130 Net Income $ 369 $ 264 $ 390 Notes: a Computron has no amortization charges. Additional Information Projection 2018 2019 2020E Year-end common stock price $50.00 $30.00 $49.00 Shares outstanding (millions) 100 100 100 Common dividends (millions) $90 $84 $100 Tax rate 25% 25% 25% Additions to retained earnings (millions) $279 $180 $290 Lease payments (millions) $20 $20 $20 Per Share Information Projection 2018 2019 2020E EPS $3.69 $2.64 $3.90 DPS $0.90 $0.84 $1.00 Book Value Per Share $27.30 $29.10 $32.00 Ratio Analysis 2018 2019 2020E Industry Average Profit margin 6.7% 4.4% 7.2% Operating profit margin 10.2% 7.7% 10.4% Basic earning power 13.7% 9.4% 15.6% ROA 9.0% 5.4% 10.8% ROE 13.5% 9.1% 15.4% Inventory turnover 7.4 6.2 9.0 Days sales outstanding 26.5 31.6 28.0 Fixed assets turnover 1.9 1.7 3.0 Total assets turnover 1.348 1.224 1.5 Current 2.1 1.6 2.5 Quick 1.0 0.7 1.9 Debt ratio 20.8% 27.6% 15.0% Debt-to-equity ratio 0.31 0.46 0.22 Liabilities-to-assets ratio 33.1% 40.6% 32.0% Earnings multiplier 1.5 1.7 1.5 TIE 8.2 4.3 13.0 EBITDA coverage 9.9 6.3 17.2 Price/earnings (P/E) 13.6 11.4 16.8 Market/book 1.8 1.0 2.7 Calculate the projected debt ratio, debt-to-equity ratio, liabilities-to-assets ratio, times-interest-earned ratio, and EBITDA coverage ratios. Explain how Computron compares with the industry with respect to financial leverage. What can you conclude from these ratios?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

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Computron's Balance Sheets (Millions of Dollars)			Projection
	2018	2019	2020E
Assets
Cash and equivalents	$ 60	$ 50	$ 60
Short-term investments	100	10	50
Accounts receivable	400	520	530
Inventories	620	820	660
Total current assets	$ 1,180	$ 1,400	$ 1,300
Net Fixed Assets	2,900	3,500	3,700
Total Assets	$ 4,080	$ 4,900	$ 5,000

Liabilities and equity
Accounts payable	$ 300	$ 400	$ 330
Notes payable	50	250	100
Accruals	200	240	270
Total current liabilities	$ 550	$ 890	$ 700
Long-term bonds	800	1,100	1,100
Total liabilities	$ 1,350	$ 1,990	$ 1,800
Common stock (100,000 shares)	1,000	1,000	1,000
Retained earnings	1,730	1,910	2,200
Total common equity	$ 2,730	$ 2,910	$ 3,200
Total liabilities and equity	$ 4,080	$ 4,900	$ 5,000


Income Statements (Millions of Dollars)			Projection
	2018	2019	2020E
Net sales	$ 5,500	$ 6,000	$ 6,600
Cost of goods sold (Excluding depr.)	$ 4,300	$ 4,800	$ 5,210
Depreciationa	$ 290	$ 320	$ 370
Other operating expenses	$ 350	$ 420	$ 400
Earnings before interest and taxes (EBIT)	$ 560	$ 460	$ 620
Less interest	$ 68	$ 108	$ 100
Pre-tax earnings	$ 492	$ 352	$ 520
Taxes (25%)	$ 123	$ 88	$ 130
Net Income	$ 369	$ 264	$ 390

Notes:
a Computron has no amortization charges.

Additional Information			Projection
	2018	2019	2020E
Year-end common stock price	$50.00	$30.00	$49.00
Shares outstanding (millions)	100	100	100
Common dividends (millions)	$90	$84	$100
Tax rate	25%	25%	25%
Additions to retained earnings (millions)	$279	$180	$290
Lease payments (millions)	$20	$20	$20


Per Share Information			Projection
	2018	2019	2020E
EPS	$3.69	$2.64	$3.90
DPS	$0.90	$0.84	$1.00
Book Value Per Share	$27.30	$29.10	$32.00




Ratio Analysis	2018	2019	2020E	Industry Average

Profit margin	6.7%	4.4%		7.2%
Operating profit margin	10.2%	7.7%		10.4%
Basic earning power	13.7%	9.4%		15.6%
ROA	9.0%	5.4%		10.8%
ROE	13.5%	9.1%		15.4%
Inventory turnover	7.4	6.2		9.0
Days sales outstanding	26.5	31.6		28.0
Fixed assets turnover	1.9	1.7		3.0
Total assets turnover	1.348	1.224		1.5
Current	2.1	1.6		2.5
Quick	1.0	0.7		1.9
Debt ratio	20.8%	27.6%		15.0%
Debt-to-equity ratio	0.31	0.46		0.22
Liabilities-to-assets ratio	33.1%	40.6%		32.0%
Earnings multiplier	1.5	1.7		1.5
TIE	8.2	4.3		13.0
EBITDA coverage	9.9	6.3		17.2
Price/earnings (P/E)	13.6	11.4		16.8
Market/book	1.8	1.0		2.7

Calculate the projected debt ratio, debt-to-equity ratio, liabilities-to-assets ratio, times-interest-earned ratio, and EBITDA coverage ratios. Explain how Computron compares with the industry with respect to financial leverage. What can you conclude from these ratios?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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