Chapter 3

Questions 26-28

Input area:

Tax rate 35%

SMOLIRA GOLF CORP.
2011 and 2012 Balance Sheets
Assets Liabilities and owners' equity
2011 2012 2011 2012
Current assets Current liabilities
Cash $ 24,046 $ 24,255 Accounts payable $ 23,184 $ 27,420
Accounts receivable 12,448 15,235 Notes payable 12,000 10,800
Inventory 25,392 27,155 Other 11,571 15,553
Total $ 61,886 $ 66,645 Total $ 46,755 $ 53,773
Long-term debt 80,000 95,000
Owners' equity $ 126,755 $ 148,773
Common stock and paid-in surplus $ 40,000 $ 40,000
Fixed assets Accumulated retained earnings 219,826 94,833
Net plant and equipment 324,695 365,734 Total $ 259,826 $ 283,606
Total assets $ 386,581 $ 432,379 Total liabilities and owners' equity $ 386,581 $ 432,379

SMOLIRA GOLF CORP.

2012 Income statement

Sales $ 366,996
Cost of goods sold 253,122
Depreciation 32,220
EBIT $ 81,654
Interest paid 14,300
Taxable income $ 67,354
Taxes (35%) 23,574
Net income $ 43,780

Dividends $ 20,000
Retained earnings 23,780

Output area:

26) Short-term solvency ratios:

2011 Current ratio 1.32

2012 Current ratio 1.24

2011 Quick ratio 0.78

2012 Quick ratio 0.73

2011 Cash ratio 0.51

2012 Cash ratio 0.45

Asset utilization ratios:

Total asset turnover 0.85

Inventory turnover 9.32
Receivables turnover 24.09

Long-term solvency ratios:

2011 Total debt ratio 0.33

2012 Total debt ratio 0.34

2011 Debt-equity ratio 0.49

2012 Debt-equity ratio 0.52

2011 Equity mulitplier 1.49

2012 Equity multiplier 1.52

Times interest earned ratio 5.71

Cash coverage ratio 7.96

Profitability ratios:

Profit margin 11.93%

Return on assets 10.13%
Return on equity 15.44%

27) Return on equity 15.44%

28) SMOLIRA GOLF, INC.

Statement of Cash Flows
For Period Ending December 31, 2012

Cash, beginning of the year $ 24,046

Operating activities
Net income $ 43,780
Plus:
Depreciation 32,220
Increase in accounts payable 4,236
Increase in other current liabilities 3,982
Less:
Increase in accounts receivable 2,787
Increase in inventory 1,763
$ 35,888
Net cash from operating activities $ 79,668

Investment activities
Fixed asset acquisition $ 73,259
Net cash from investment activities $ 73,259

Financing activities
Decrease in notes payable $ (1,200)
Dividends paid 20,000
Increase in long-term debt 15,000
Net cash from financing activities $ (6,200)

Net increase in cash $ 209

Cash, end of year $ 24,255

Chapter 4
Question 24

Input area:

Sales $ 743,000 Assets Liabilities and owners' equity

Costs 578,000 Current assets Current liabilities
Other expenses 15,200 Cash $ 20,240 Accounts payable
EBIT $ 149,800 Accounts receivable 32,560 Notes payable
Interest expense 11,200 Inventory 69,520 Total
Taxable income $ 138,600 Total $ 122,320 Long-term debt
Taxes 48,510 Fixed assets
Net income $ 90,090 Net plant and Owners' equity
equipment $ 330,400 Common stock and
Dividends $ 27,027 paid-in surplus
Add. to retained earnings 63,063 Retained earnings
Total
Total liabilities and
Sales increase 20.00% Total assets $ 452,720 owners' equity
Tax rate 35%

Output area:

Dividend payout ratio 0.30

2012 Pro Forma Income Statement Assets Liabilities and owners' equity
Sales $ 891,600 Current assets Current liabilities
Costs $ 693,600 Cash $ 24,288.00 Accounts payable
Other expenses $ 18,240 Accounts receivable $ 39,072.00 Notes payable
EBIT $ 179,760 Inventory $ 83,424.00 Total
Interest expense $ 11,200 Total $ 146,784 Long-term debt
Taxable income $ 168,560 Fixed assets
Taxes $ 58,996 Net plant and Owners' equity
Net income $ 109,564 equipment 396,480 Common stock and
Dividends $ 32,869 paid-in surplus
Add. To RE 76,695 Retained earnings
Total
Total liabilities and
Total assets $ 543,264 owners' equity

External financing $ 2,969

lities and owners' equity

$ 54,400
13,600
$ 68,000
$ 126,000

$ 112,000
146,720
$ 258,720

$ 452,720

lities and owners' equity

$ 65,280
$ 13,600
$ 78,880
126,000

$ 112,000
$ 223,415
$ 335,415

$ 540,295