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Module 2 Assignment ABC Inc. 2020 sales are $1,000,000. Operating costs (excluding depreciation) are 65% of...

Module 2 Assignment
ABC Inc. 2020 sales are $1,000,000. Operating costs (excluding depreciation) are 65% of sales. Net fixed assets are $195,000. Depreciation amounted to 12% of net fixed assets. Interest expenses are $105,000. The tax bill must be calculated using the corporate income tax table in the text, and ABC Inc. paid 8% of net income in dividends.
Prepare ABC Inc.’s income statement for 2018:
ABC Inc. Income Statement
2020
Sales
Operating costs (excluding depreciation)
EBITDA
Depreciation
EBIT
Interest Expense
EBT
Taxes***
Net Income
Common Dividends
Addition to Retained Earnings
Operating Cash Flow
***For Tax Rate use the corporate tax table in chapter 2 to determine the company’s tax bill, average and marginal tax rates. Use the average tax rate for this portion of the income statement.
Average tax ________
Marginal tax ________
2. The financial statements for XYZ Inc. are shown below.
Income Statement and other info:
2020 2019
Year-end stock price 60 50
# of shares 5600 3600
XYZ Inc. Income Statement
2020 2019
Sales 900,000 960,000 850,000
COGS 640,000 610,000
Gross Profit 320,000 240,000
Operating costs (excluding depreciation) 70,000 50000 60,000
EDITDA 180,000 270,000 180,000
Depreciation 15,000 20,000 18,000
EBIT 165,000 250,000 162,000
Interest Expense 100,000 100000 100,000
EBT 65,000 150,000 62,000
Taxes 19,500 25,000 5,000
Net Income 45,500 125,000 57,000
Common Dividends 4,550 6000 3000
Addition to Retained Earnings 40,950 119,000 54,000
Balance Sheet
Assets 2018 2017 2020 2019
Cash and Cash Equivalents 40,000 30,000 66,000 128,000
Short term Investments 4,500 8,500 10,500 9000
Accounts Receivable 166,000 190,000 164,000 242,950
Inventories 80,000 70,000 100,000 80,000
Total current assets 290,500 298,500 340,500 459,950
Net Fixed Assets 115,000 90,000 115,000 90,000
Total Assets 405,500 388,500 455,500 549,950
Liabilities and Equity 2017 2016 2020 2,019
Accounts Payable 17,000 14,500 17,000 12,500
Accruals 18,500 14,000 18,500 13,000
Notes Payable 11,000 4,000 11,000 4,000
Total Current Liabilities 46,500 32,500 46,500 29,500
Long term debt 133,000 186,950 133,000 186,950
Total Liabilities 179,500 219,450 179,500 216,450
Common Stock 146,000 130,000 126,000 132,000
Retained Earnings 80,000 39,050 150,000 201,000
Total Common Equity 226,000 169,050 276,000 333,000
Total Liabilities and Equity 405,500 388,500 455,500 549,450
a. Find all of the ratios below:
2020 IA
Liquidity Ratios 3.5
Current Ratio 2
Quick Ratio
Asset Management Ratios
Inventory Turnover 25.39
Days Sales Outstanding 55.08
Total Assets Turnover 2.7
Debt Ratios
Debt Ratio 35%
TIE Ratio 6.5
Debt to Equity Ratio
Profitability Ratios
Profit Margin 12%
Return on Assets 13.50%
Return on Equity 15%
Market Ratios
EPS N/A
P/E ratio 14.78
b. Write a synopsis on how this company compares with the industry in each section of ratios.
c. Perform a DuPont analysis for XYZ Inc.
ROE = PM * TA Turnover * Equity Multiplier
2020
2019
d. Explain the results in part c.
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Homework Answers

Answer #1

Please see step wise answer of Question 1 . Question 2 - I will provide shortly.

Thank you  

Amnt($)
Sales-A        10,00,000
Operating Cost -65% of Sales -B           6,50,000
EBITDA(A-B)           3,50,000
Less - depreciation              23,400
EBIT           3,26,600
Less - Interest           1,05,000
EBT           2,21,600
Less - taxes
Base amount              22,250
Excess of Base
39%*(221600-100000) 47424
Total Tax amount              69,674
Net income           1,51,926
Dividend -8% on Net Income              12,154
Addition to Retained earnings           1,39,772
( net income - Dividend)
Operating Cash flow
Net Income           1,51,926
Add- Depreciation              23,400
Operating Cash flow           1,75,326
Average tax rate Taxes/ EBIT
Tax              69,674
EBT           2,21,600
Average tax rate 31%
Marginal Tax rate 39%
Net Fixed Asset           1,95,000
Depreciation -12% of Net Fixed asset              23,400
As per chapter 2 tax rate calculated as below
If a corporate Taxable Income $100000-$335000
Base amount of Tax $              22,250
Plus this % on the Excess Over the Base 39%
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