FINANCIAL STATEMENTS

Balance Sheet

Assets 2011 2012

Cash 60 50
Marketable Securities 40 60
Account Receivables 50 40
Inventory 40 60
Fixed Assets 60 70
Total 250 280

Liabilities & Owners' Equity 2011 2012

Account Payable 30 41.96
Note Payable 40 45
Accruals 20 14
Long-term Debt 70 75
Common Stock (60shares@1) 60 60
Retained Earnings 30 44.04
Total 250 280

Income Statement
2011 2012
Sales 320 384
- Cost of Goods Sold -215 -250
Gross Profit 105 134
- Selling and Admin Expenses -65 -82
Earnings before Int & Taxes 40 52
- Interest (10%) 4 5.2
Earnings before Taxes 36 46.8
- Taxes (25%) 9 11.7
Net Income 27 35.1

Dividend (60%) 16.2 21.06

Retained Earnings (40%) 10.8 14.04

Earnings Per Share 0.45 0.585

Dividend Per Share 0.27 0.351
Statement of Cash Flows
2012
Operating Activities
Net Income 35.1
+/- Changes of working capital
decrease in account receivables 10
increase in inventory -20
increase in account payable 11.96
decrease in accruals -6
Total Sources/(Uses) of Cash 31.06

Investing Activities
Increase in Marketable Securities -20
Increase in Fixed Assets -10
Total Sources/(Uses) of Cash -30

Financing Activities
Increase in Note Payable 5
Increase in long-term debt 5
Dividend -21.06
Total Sources/(Uses) of Cash -11.06

Net Increase/(Decrease) in Cash -10

Beginning Cash Balance 60
Ending Cash Balance 50

Statement of Equity Changes

2012
Beginning Total Equity 90
Add: Net Income 35.1
Less: Dividend -21.06
Ending Total Equity 104.04
FINANCIAL STATEMENTS ANALYSIS

Balance Sheet
Common Size (%) %
Assets 2011 2012 2011 2012 2012
Cash 60 50 24.0 17.9 -16.7
Marketable Securities 40 60 16.0 21.4 50.0
Account Receivables 50 40 20.0 14.3 -20.0
Inventory 40 60 16.0 21.4 50.0
Fixed Assets 60 70 24.0 25.0 16.7
Total 250 280 100.0 100.0 12.0

Liabilities & Owners' Equity 2011 2012 2011 2012 2012

Account Payable 30 41.96 12.0 15.0 39.9
Note Payable 40 45 16.0 16.1 12.5
Accruals 20 14 8.0 5.0 -30.0
Long-term Debt 70 75 28.0 26.8 7.1
Common Stock (60shares@1) 60 60 24.0 21.4 0.0
Retained Earnings 30 44.04 12.0 15.7 46.8
Total 250 280 100.0 100.0 12.0

Income Statement Common Size (%) %

2011 2012 2011 2012 2012
Sales 320 384 100.0 100.0 20.0
- Cost of Goods Sold -215 -250 -67.2 -65.1 16.3
Gross Profit 105 134 32.8 34.9 27.6
- Selling and Admin Expenses -65 -82 -20.3 -21.4 26.2
Earnings before Int & Taxes 40 52 12.5 13.5 30.0
- Interest (10%) 4 5.2 1.3 1.4 30.0
Earnings before Taxes 36 46.8 11.3 12.2 30.0
- Taxes (25%) 9 11.7 2.8 3.0 30.0
Net Income 27 35.1 8.4 9.1
RATIO ANALYSIS

LIQUIDITY

Current Ratio:
Current Assets/Current Liabilities

2011: (60+40+50+40)/(30+40+20) = 2.11

2012: (50+60+40+60)/(41.96+45+14) = 2.08

Quick Ratio/Acid Test:

(Current Assets - Inventory)/Current Liabilities

2011: (60+40+50+40-40)/(30+40+20) = 1.67

2012: (50+60+40+60-60)/(41.96+45+14) = 1.49

ASSET MANAGEMENT

Average Collection Period/Days Sales Outstanding:

Account Receivables/(Sales/365)

2011: 50/(320/365) = 57.03

2012: 40/(384/365) = 38.02

Account Receivable Turnover:

Sales/Account Receivables

2011: 320/50 = 6.40

2012: 384/40 = 9.60

Inventory Turnover:
Cost of Goods Sold/ Inventory

2011: 215/40 = 5.38

2012: 250/60 = 4.17

Fixed Asset Turnover:

Sales/Fixed Assets
 2011: 320/60 = 5.33
2012: 384/70 = 5.49

Total Asset Turnover:

Sales/Total Assets

2011: 320/250 = 1.28

2012: 384/280 = 1.37
DEBT MANAGEMENT

Times Interest Earned:

Earnings Before Interest and Taxes/Interest Expense

2011: 40/4 = 10.00

2012: 52/5.2 = 10.00

Debt Ratio:
Total Debt/Total Assets

2011: (30+40+20+70)/250 = 0.64

2012: (41.96+45+14+75)/280 = 0.63

Debt-to-Equity Ratio:
Total Debt/Total Equity

2011: (30+40+20+70)/(60 + 30) = 1.78

2012: (41.96+45+14+75)/(60+44.04) = 1.69

PROFITABILITY

Gross Profit Margin:

Gross Profit/Sales

2011: 105/320 = 33%

2012: 134/384 = 35%

Operating Profit Margin:

Earnings Before Interest and Taxes/Sales

2011: 40/320 = 0.13%

2012: 52/384 = 0.14%

Basic Earnings Power:

Earnings Before Interest and Taxes/Total Assets
 2011: 40/250 = 0.16%
2012: 52/280 = 0.14%

Net Profit Margin:

Net Income/Sales

2011: 27/320 = 8.44%

2012: 35.1/384 = 9.14%

Return on Asset:
Net Income/Total Assets

2011: 27/250 = 10.80%

2012: 35.1/280 = 12.54%

Return on Equity:
Net Income/Owners' Equity

2011: 27/(60+30) = 30.00%

2012: 35.1/(60+44.04) = 33.74%

MARKET VALUE

Price-Earning Ratio:
Market Price Per Share/Earnings Per Share

Market-to-Book Value Ratio:

Market Price Per Share/Book Value Per Share
MODIFYING ACCOUNTING DATA

Net Operating Working Capital = Operating Current Assets - Operating Current Liabilities
= (Cash + A/Rec + Inv) - (A/Payable + Accruals)
2011: = (60 + 50 + 40) - (30 + 20) = 100
2012: = (50 + 40 + 60) - (41.96 + 14) = 94.04

Total Operating Capital = NOWC + Net Fixed Assets

2011: = (100) + (60) = 160
2012: = (94.04) + (70) = 164.04

NOPAT = EBIT(1 - tax rate)

2011: = (40)(1 - 0.25) = 30
2012: = (52)(1 - 0.25) = 39

FCF = NOPAT - Net Investment in TOC

2012: = 39 - (164.04 - 160) = 34.96

NCF = NI + Depr & Amort

OCF = NOPAT + Depr or (Sales - Costs)(1 - tax rate) + (Depr)(tax rate)

ROIC = NOPAT/TOC
2011: = 30/160 = 18.75%
2012: = 39/164.04 = 23.77%

EVA = NOPAT - (WACC)(TOC)

MVA = MV of Equity - BV of Equity

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