Question

Tom Mitchell graduated from Central Michigan University in 1994. Tom started a company with just two people the company produces hardened steel cutting blades. These blades are sold to machine shops and manufacturing companies. The company has 100,000 shares of common stock issued to five people. Mitchell Industries has sales of 38,765,331.00 per year. Mitchell's selling and administrative expenses are 3,117,213.00. The factory is valued at 38,716,000.00. Trucks and other fixed assets are valued at 7,325,413.00. Mitchell has cash on hand of 3,113,221.00 and Accts receivable of 13,413.020.00. They have accts payable of 1,916,442.00 and notes of 1,077,319.00. Mitchell's cost of goods soldis 16,317,564.00. Mitchells has a mortgage of 14,799,000.00 and other long term debt of 3,119,989.00. Interest expense is 792,596.00. Depreciation expense is 3.4 million dollars per year. The company pays 40% in taxes. Mitchell pays 35% of earnings in dividends. 1. Prepare a balance sheet 2. Prepare an income statement 3. What is the dividend? 4. What is the profit margin? 5. What is the debt to equity?

Answer 1

Income Statement:

Sales	38765331
Less: Cost of Goods sold	16317564
Gross profit	22447767
Less: Selling & Admin expenses	3117213
Profit before depreciation, interest & tax	19330554
Less: Depreciation	3400000
Profit before interest and tax	15930554
Less: Interest	792596
Profit before tax	15137958
Less: Tax (40%)	6055183.20
Net profit after tax	9082774.80

Balance Sheet

Current Assets:
Cash	3113221
Account receivables	13413020
Total Current Assets	16526241
Non Current Assets:
Factory	38716000
Trucks & Other fixed assets                                                           7325413
Less: Depreciation                                                                         3400000	3925413
Total Non Current Assets	42641413
Total Assets	59167654
Liabilities and Stockholder's equity
Accounts Payable	1916442
Notes Payable	1077319
Income tax payable	6055183.20
Mortgage	14799000
Long term debt	3119989
Total Liabilities	26967933.20

Dividend: 9082774.80 * 35% = $3178971.18

Profit margin = Net profit / Sales

Profit margin: 9082774.80 / 38765331 = 23.43%