Case Calculation Analysis
Read Ratios And Financial Planning At East Coast Yachts Case (Closing Case on page 80) and answer the following questions:
- CalculateAll the ratios for East Cost Yachts,
(1)Current Ratio=Current Asset/Current liabilities=51,123,050/50,584,750=1.01
(2)Quick Ratio=Current Assets-Inventory/Current liabilities=51,123,050-20,149,650/50,584,750=0.61
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Order Paper Now(3)Total Assets Turnover=Sales/Total Assets =611,582,000/401,558,750=1.52
(4)Inventory Turnover=COGS/Inventory=431,006,000/20,149,650=21.3
(5)Receivables Turnover=Sales/Accounts Receivable=611,582,000/18,681,500=32.73
(6)Debt Ratio=Total Assets-Total Equity/Total Assets=401,558,750-181,714,000/401,558,750=0.54
(7)Debt Equity Ratio=Total Debit/Total Equity=169,260,000/181,714,000=0.93
(8)Equity Multiplier=Total Assets/Total Equity=401,558,750/181,714,000=2.21
(9)Interest Coverage=EBIT/Interest=87,531,900/11,000,900=7.96
(10)Profit Margin=Net income/Sales=45,918,600/611,582,000=0.075
(11)ROA=Net income/Total Assets=45,918,600/401,558,750=0.114
(12)ROE=Net income/Total Equity=45,918,600/181,714,000=0.253
Comparison the East Coast Yachts Ratio to Yachts Industry Ratio
Comparison the East Coast Yachts Ratio to Yachts Industry Ratio Yachts Industry Ratio Financial Ratio Value Lower Quartile Median. Upper Quartile Current Ratio 1.01 0.86 1.51 1.97 Quick Ratio 0.61 0.43 0.75 1.01 Total Asset Turnover 1.52 1.10 1.27 1.46 Inventory Turnover 21.3 12.18 14.38 16.43 Receivable Turnover 32.73 10.25 17.65 22.43 Debt Ratio 0.54 0.32 0.56 0.61 Debt-Equity-Ratio 0.93 0.83 1.13 1.44 Equity Multiplier 2.21 1.83 2.13 2.44 Interest Coverage 7.96% 5.72 8.21 10.83 Profit Margin 7.5% 5.02% 7.48% 9.05% ROA 11.4% 7.05% 10.67% 14.16% ROE 25.3% 14.06% 19.32% 26.41% Performance of East Cost Yachts to the industry as a whole:
According to the data analysis in the above table, it is possible to calculate the total asset turnover rate, inventory turnover rate, accounts receivable turnover rate, equity multiplier, profit margin, returns on assets, and return on equity of the East Coast Yacht Company are higher than that of the yacht. Industry average
The company’s current ratio and quick ratio are far below the industry average, and the company’s short-term repayment ability is also lower than other companies in the same industry. Although this part of the company’s data is far below average. However, the company’s total asset turnover rate, inventory turnover rate and receiving turnover rate are higher than the industry average of the same industry, which can be analyzed that the company’s operational efficiency is higher. From the data in the table, we can know that the company’s long-term repayment ability is no problem. Because the company’s corporate debt ratio, debt-to-equity ratio, equity multiplier, and interest coverage are almost the same as in the industry. However, the company also has its advantages. The company’s profit margin, return on assets, and return on equity are all above the same average. According to the above data, the company is at the leading level in the same industry.
External funds (EFN)
Sustainable Growth rate=Return on Equity*(1-Dividend Payout Ratio)
Return on Equity=Net income/Equity=45,918,600/181,714,000=25%
Sustainable Growth rate=ROE-*(1-DPR)=25%*[1-(17,374,500/45,918,600)]=15.5%
External Fund Needed=Total Assets-Total Liabilities& Equity=
Sustainable Growth Rate of 15.5%
Sales
Cost of Goods Sold
Selling general and administrative
all of the ratios listed in the industry table for East Coast Yachts
- Compare the operating and financial performance of East Coast Yachts to the industry Median ratios. (Note: you should apply the concepts you will learn from reading the case on: “Assessing the Financial Health Of A Company,” which is posted in Canvas.
- Calculate the sustainable growth rate for East Coast Yachts. Calculate the External Funds Needed (EFN), and prepare pro forma income statements and balance sheets assuming growth at precisely this rate. Can the company grow at a higher rate than the sustainable growth rate? how?
- East Coast Yachts does not intend to raise external equity capital because shareholders do not want to dilute their shares and control positions. However, East Coast Yachts is planning for a growth rate of 20% next year. What are your conclusions and recommendations about the feasibility of East Coast Yachts expansion plan?
