Verified Document

Business Finance Homework Problem - Chapter Five. A2 Coursework

Business Finance Homework Problem - Chapter Five. This is a comprehensive problem that provides a review of the material covered in the course to date (particularly chapters 3,4, and 5).

Branson Bowling Equipment Company

Balance Sheet - December 31, 2011

Assets

Liabilities and Stockholder's Equity

Cash

$70,000

Accounts Payable

$3,080,000

Marketable Securities

Accrued Expenses

Accounts Receivable

4,200,000

Notes Payable (Due 9/26/12

Inventory

Bonds (10%)

Gross Plant and Equipment

Common Stock (2,380,000

Shares, par value $1.00

Accumulated Depreciation

Retained Earnings

1,652,000

Total Assets

$11,382,000

Total Liabilities and Stockholder's Equity

$11,382,000

Income Statement - 2011

Sales (All credit sales)

$9,800,000

Fixed Costs1

2,940,000

Variable Costs (0.60)

5,880,000

Earnings Before Interest and Taxes

980,000

Less: Interest

350,000

Earnings Before Taxes

$630,000

Less: Taxes @ 36%

226,800

Earnings After Taxes

403,200

Dividends (40% payout)

161,200

Increased Retained Earnings

$241,800

1 Fixed costs include both lease expenses of $280,000 and depreciation of $700,000

The table below shows selected ratios for the firms in this industry.

Profit margin

5.75%

Compute all of the ratios and compare them to the industry averages. Discuss the ratios in terms of the weaknesses and strengths. What recommendations can you make to improve Branson's performance. Note: Your analysis should go a bit beyond simply stating which ratios are lower or higher than the industry averages. Try to think about what these ratios mean.
Profit Margin: 403,200 / 9,800,000 = 4.11%

ROA: 630,000 / 11,382,000 = 5.53%

ROE: 403,200 / 2,380,000 = 16.94%

Rec. Turnover: 9,800,000 / 4,200,000 = 2.33

Inv. Turnover: 9,800,000 / 1,400,000 = 7

Fixed Asset Turnover: 9,800,000 / (8,400,000 -- 2,800,000) = 1.75

Total Asset: 9,800,000 / 11,382,000 = 0.86

Current Ratio: (70,000 + 112,000 + 4,200,000 + 1,400,000) /

(3,080,000 + 210,000 + 560,000)= 1.5

Quick Ratio: (70,000+112,000+4,200,000) / (3,080,000+210,000+560,000)= 1.14

Interest Coverage: 980,000 / 350,000 = 2.8

Fixed Charge Coverage: (980,000 + 280,000) / (280,000 + 350,000) = 2

The firm is currently operating with a net profit margin that is roughly 71.5% of…

Cite this Document:
Copy Bibliography Citation

Related Documents

European Union Business in Europe
Words: 5865 Length: 12 Document Type: Term Paper

European Union - Business in Europe European Union * Competitive advantages of a European area in a chosen Industry and Porter's Five Forces * Personal impressions and reflections on what was learned? The European Union is made up of several countries, and all these countries have one single aim, which is to promote and develop business relationships within Europe and also with the rest of the world, in today's world of globalization. When one wishes

Business Proposition Business Competition Chain. Word Count:
Words: 2773 Length: 9 Document Type: Essay

business proposition business competition chain. Word count: 400 words B) Based idea produced question 1 part A, explain main difficulties/barriers? Word count: 400 words Question 2 A) Reflect possibility finance business. In the current context of the unstable economy, more and more people and firms have come to lose their activity and their savings. In such a context, they seek to become engaged in new opportunities, to create new business

Long-Term Success in Your Specific Area of
Words: 3486 Length: 10 Document Type: Admission Essay

long-term success in your specific area of interest. How have your previous experiences prepared you for this professional career? What areas of specialization within the Carroll School of Management do you believe will be most valuable in achieving your goals? What specific short-term career objectives have you set to assist you in achieving your long-term career plans? I will never feel successful if success means putting up my feet and

Operations Strategy for Future Developments of Delta
Words: 2617 Length: 9 Document Type: Essay

Operations Strategy for Future Developments of Delta Synthetic Fibres Appraise the main Operations Management issues at Delta Synthetic Fibres. Although Delta Synthetic Fibres implemented an operations management strategy that helped evolve their product line and fuel production, they could have optimized sales by addressing several issues. Manufacturing companies focus so heavily on the delivery of their product, that they do not invest resources in non-production related process improvements. They spend little time

Ethical Leadership Given the Recent Crash on
Words: 4439 Length: 15 Document Type: Research Paper

Ethical Leadership Given the recent crash on Wall Street and the housing market symbolized by corrupt financiers like Bernard Madoff, ethical and moral leadership of corporations has become a major issue for those who study the American capitalist system. In reality, such concerns about the lack of morality in business, government and society as a while has increased significantly in the last thirty years, which undoubtedly has been an era that

Macro-Forecast: Continuing Crisis in Housing Macro-Forecast of
Words: 972 Length: 4 Document Type: Essay

Macro-Forecast: Continuing Crisis in Housing Macro-Forecast of Current Events: Continuing Crisis in U.S. Housing Market Macro-Forecast of Current Events: Continuing Crisis in U.S. Housing Market Recent, startling revelations about unethical foreclosure procedures may delay the resolution of thousands of troubled mortgage loans in the U.S. And are quickly becoming a risk for the housing market, and the U.S. economic recovery overall. The breadth of the problem is uncertain, in terms of the amount of

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now