3 ) CALCULATE THE INTERNAL GROWTH RATE FOR S&S AIR ,INC.
FORMULA TO CALCULATE IGR = ROA * RETENTION RATIO
ROA = RETURN ON ASSETS
RETURN ON ASSETS = NET INCOME / TOTAL ASSETS
= $ 1845242 / $ 17379480
= 0.1061 * 100
= 10.61 % ( AROUND 11 %)
b = RETENTION RATIO
= RETAINED EARNINGS / NET INCOME
= $ 1285242 / $ 1845242
= 70 %
INTERNAL GROWTH RATE = ( 11 * 70) / 100
= 770 / 100
= 7.7 %
CALCULATE THE SUSTAINABLE GROWTH RATE :
FORMULA = RETURN ON EQUITY * RETENTION RATIO
RETURN ON EQUITY = NET INCOME / SHARE HOLDER EQUITY
= $ 1845242 / $ 9556430
= 0.1930
= 19.31 %
RETENTION RATIO = 70%
SUSTAINABLE GROWTH RATE =( 19.31 * 70 ) / 100
= 13.51 %
4) CALCULATE THE EFN ( EXTERNAL FUNDS NEEDED ) FOR S& S AIR INC.
PLANNING FOR GROWTH RATE IN THE NEXT YEAR= 12%
ACTUAL SALES = $ 36599300
=($ 36599300 * 112 ) / 100
= $ 40991216
NET INCOME ALSO INCREASES BY 12 % = ($ 1845242 * 112) / 100
= $ 2066671
ASSETS OF S & S AIR INC . HAS ASSETS OF = $ 17379480
PROJECTED COST ( 12 % ) =( 17379480 * 12 ) / 100
= $ 2085537.6
TOTAL ASSETS = $ 19465017
ACCOUNTS PAYABLE GROWS AT 12 % = $ 844550
=( $ 844550 * 112 ) / 100
= $ 945896
EFN ( EXTERNAL FUNDS NEEDED ) =( TOTAL ASSETS - TOTAL CURRENT LIABILITIES - ACCOUNTS PAYABLE - SHARE HOLDER EQUITY )
= $ 19465017 -945896 - 2773050 - 5050000 - 9556430
EFN = $ 1139641
3. Calculate the internal growth rate and sustainable growth rate for S&S Air. What do these...
Planning for Growth at S&S Air After Chris completed the ratio analysis for S&S Air (see Chap ter 3. Mark and Todd approached him about planning for next year's sales. The company had historically used lime planning for investment needs. As a result, the company experienced some challenging times because of cash flow problems. The lack of planning resulted in missed sales, as well as periods when Mark and Todd were unable to draw salaries. To this end, they would...
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please answer number 3. question 1 and 2 have been answered Planning for Growth at S&S Air After Chris completed the ratio analysis for S&S Air (see Chap ter 3. Mark and Todd approached him about planning for next year's sales. The company had historically used lime planning for investment needs. As a result, the company experienced some challenging times because of cash flow problems. The lack of planning resulted in missed sales, as well as periods when Mark and...
Problem 4-27 EFN and Internal Growth [LO2, 3] The most recent financial statements for Crosby, Inc., follow. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. CROSBY, INC. 2017 Income Statement Sales Costs Other expenses $755,000 611,000 25,000 Earnings before interest and taxes Interest paid $ 119,000 10,800 Taxable income Taxes (22%) $ 108,200 23,804 Net income $...
please, solve in excel with descriptions thank you! Planning for Growth at S&S Air After Chris completed the ratio analysis for S&S Air (see Chapter 3), Mark and Todd approached him about planning for next year's sales. The company had historically used little planning for investment needs. As a result, the company experienced some challenging times because of cash flow problems. The lack of planning resulted in missed sales, as well as periods when Mark and Todd were unable to...
Using spread sheets above: 1) What is the Sustainable Growth Rate? 2) What is the Internal Growth Rate? 3) What is the ROE? 4) What is the ROA? 5) What is the Profit Margin? 2019 2,570 2018 2,820 Current Assets Cash Accounts Receivable Inventory Total 8,100 7,875 Balance Sheet ($ in millions) 2019 2018 Current Liabilities 405 310 3,055 2,640 Long-term Debt 3,850 3,275 Owner's Equity 7,310 6.225 Common Stock 10,670 10,960 Retained Earnings Total 17,980 17,185 Total Liabilities and...
i would question 2 and 3. ihave to answer for question 1. thank you Planning for Growth at S&S Air After Chris completed the ratio analysis for S&S Air (see Chap ter 3. Mark and Todd approached him about planning for next year's sales. The company had historically used lime planning for investment needs. As a result, the company experienced some challenging times because of cash flow problems. The lack of planning resulted in missed sales, as well as periods...
Q4. Calculate the sustainable growth rate for LSUS corporation. Calculate external funds needed (EFN) and prepare pro forma income statements and balance sheets assuming growth at precisely this rate. Recalculate the ratios in the previous question. What do you observe? Choice 2: Ratios and Financial Planning After Han’s analysis of LSUS corporation’ cash flow, Amanda, the CEO of the company, approached Han about the company’s performance and future growth plans. First, Amanda wants to find out how LSUS corporation is...
The most recent financial statements for Fleury Inc., follow. Sales for 2012 are projected to grow by 20 percent. Interest expense will remain constant, the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets and accounts payable increase spontaneously with sales FLEURY, INC 2011 Income Statement Sales Costs Other expenses $ 758,000 593,000 14,000 Earnings before interest and taxes Interest paid $151,000 10,000 Taxable income Taxes (40%) $141,000 56,400 Net income...