Question

Calculate the internal and sustainable growth rates

Integrated mihi-case Working with Financial Juma Listed are the 2021 financial statements for Garners' Platoon Mental Health Care, Inc. Spread the balance sheet and income statement. Calculate the financial ratios for the firm, including the internal and sustainable growth rates. Using the DuPont system of analysis and the industry ratios reported, evaluate the performance of the firm. GARNERS' PLATOON MENTAL HEALTH CARE, INC. Balance Sheet as of December 31, 2021 (in millions of dollars) Assets Llabilities and Equity Current assets Current liabilities Cash and marketable securities $ 421 Accrued wages and taxes Accounts receivable 1,109 Accounts payable Inventory 1,760 Notes payable Total $3.290 Total Fixed assets Long-term debt Gross plant and equipment $5,812 Stockholders' equity Less: Depreciation 840 Preferred stock (30 million shares) Net plant and equipment $4,972 Common stock and paid-in surplus (200 million shares) Other long-term assets 892 Retained earnings $5,864 Total Total assets $9.154 Total liabilities and equity $ 316 867 872 $2,055 $3,090 $ 60 637 Total 3.312 $4,009 $9,154 $ 4,980 GARNERS' PLATOON MENTAL HEALTH CARE, INC. Income Statement for Year Ending December 31, 2021 (in millions of dollars) Net sales (all credit) Less: Cost of goods sold Gross profits Less: Other operating expenses Earnings before interest, taxes, depreciation, and amortization (EBITDA) Less: Depreciation Earnings before interest and taxes (EBIT) Less: Interest Earnings before taxes (EBT) Less: Taxes Net income Less: Preferred stock dividends 2.246 $ 2,734 125 $ 2,609 200 $ 2,409 315 $ 2,094 440 $ $ 654 60 (continued)

Answer 1

THE FINANCIAL RATIOS OF COMPANY ARE

(A) LIQUIDITY RATIO = Liquidity ration tell company abiliity to pay its debts and other liabilities ,

some liquidity ratio are

(1)current ratio = current assets / current laibilities

= 3290/2055

=1.6

where as industry has 2.0 times which shows the company liabilties are more in comparision to industry

(2)quick ratio = (cash + cash equivalents + short term investments+ current receivables)/ current liabilities

=421+1109/2055

=0.74

where as industry 1.20times which shows company liquitidy is poor as per industry in paying off its liablities in cash

(3)cash ratio =( cash & cash equivalents )/ current liabilties

=421/2055

=0.20

industry has 0.25 times , cash ratio of company is poor then industry

(4)sustainable growth = retention rate * return on equity

retention rate = (net income - dividends)/ net income

=(654-60)/654*100

=91%

roe= net income / total shareholders equity

=654/4009*100

=16.31%

sustainabal growth rate of company = 91%*16.31%

=14.84%