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MBA,MCS,M.phil
Devry University
Jan-2008 - Jan-2011
MBA,MCS,M.Phil
Devry University
Feb-2000 - Jan-2004
Regional Manager
Abercrombie & Fitch.
Mar-2005 - Nov-2010
Regional Manager
Abercrombie & Fitch.
Jan-2005 - Jan-2008
Â
After Dan's analysis of East Coast Yachts' cash flow (at the end of our previous chapter), Larissa approached Dan aobut he company's performance and future growth plans. First Larissa wants to find out how East Coast Yachts is perhforming relative to its peers. Additionally, she wants to find out the future financing necessary to fund the company's growth. In the past, East Coat Yachts expeirned difficulty in financing its growth plan, in part because of poor planning. In fact, the company had to turn down several large jobs because its facilities were unable to handle the additional demand. Larissa hoped that Dan would be able to estimate the amount of capital the company would have to raise next year so that East Coat Yachts would be better prepared to funds its expansion plans.
To get Dan started with his anaylses, Larissa provided the following financial statements. Dan then gathered the industry ratios for the yacht manufacutring industry.
Income Statement
| Sales | $555,984,000 |
| Cost of Goods Sold | 391,824,000 |
| Selling, General, and administrative | 66,441,600 |
| Depreciation | 18,144,000 |
| EBIT | 79,574,400 |
| Interest Expense | 10,000,800 |
| EBT | 69,573,600 |
| Taxes | 27,829,440 |
| Net Income |
41,744,160 |
| Dividends | 15,795,000 |
| Retained Earnings | 25,949,160 |
Balance Sheet
| Current Assets | Â | Current Liabilities | Â |
| Cash and Equivalents | $10,108,800 | Accounts Payable | $23,814,400 |
| Accounts Receivable | 16,983,200 | Notes Payable | 16,852,500 |
| Inventory | 18,317,860 | Accrued Expenses | 5,566,500 |
| Other | 1,065,600 | Total Current Liabilities | 46,233,400 |
| Total Current Assets | 46,475,460 | Â | Â |
| Fixed Assets | Â | Long-term debt | 131,904,000 |
| Property, Plant, equp | 415,827,000 | Total Long term debt | 131,904,000 |
| Less Accum Deprec. | (103,496,300) | Â | Â |
| Net Property, plan, equ | 312,330,700 | Â | Â |
| Intangible Assets | 6,156,000 | Stockholder's Equity | Â |
| Total Fixed Assets | 318,486,700 | Preferred Stock | 2,700,000 |
| Â | Â | Common Stock | 34,167,000 |
| Â | Â | Capital Surplus | 25,633,000 |
| Â | Â | Accumulated Retain earning | 167,524,760 |
| Â | Â | Less Treasury Stock | (43,200,000) |
| Â | Â | Total Equity | 186,824,760 |
| Total Assets | $364,962,160 | Total Liabilities/Sharehold Equ | 364,962,160 |
| Â | Â | Â | Â |
| Â | Â | Â | Â |
Calculated Ratios
Liquidity or Short-Term Solvency Ratios
Calculate and compare to industry ratios
| Â |
East Coast Yachts |
Lower Quartile |
Median |
Upper Quartile |
Positive, Negative, or Neutral Relative to Industry |
|
Current Ratio |
1.01 |
0.86 |
1.51 |
1.97 |
Negative |
|
Quick Ratio |
0.61 |
0.43 |
0.75 |
1.01 |
Negative |
Asset Management or Turnover Ratios
Calculate and compare to industry ratios:
| Â |
East Coast Yachts |
Lower Quartile |
Median |
Upper Quartile |
Positive, Negative, or Neutral Relative to Industry |
|
Assets Turnover |
1.52 |
1.10 |
1.27 |
1.46 |
Positive |
|
Inventory Turnover     |
21.39 |
12.18 |
14.38 |
16.43 |
Positive |
|
Receivables Turnover |
32.74 |
10.25 |
17.65 |
22.43 |
Positive |
Long-Term Solvency Ratios
Calculate and compare to industry ratios:
| Â |
East Coast Yachts |
Lower Quartile |
Median |
Upper Quartile |
Positive, Negative, or Neutral Relative to Industry |
|
Debt Ratio    |
.49 |
0.32 |
0.47 |
0.61 |
Neutral |
|
Debt-Equity Ratio |
.96 |
0.51 |
0.83 |
1.03 |
Neutral |
|
Equity Multiplier |
1.96 |
1.51 |
1.83 |
2.03 |
Neutral |
|
Interest Coverage |
7.96 |
5.72 |
8.21 |
10.83 |
Negative |
Profitability Measures  Â
Calculate and compare to industry ratios:
| Â |
East Coast Yachts |
Lower Quartile |
Median |
Upper Quartile |
Positive, Negative, or Neutral Relative to Industry |
|
Profit Margin     |
7.51% |
5.02% |
7.48% |
9.05% |
Neutral |
|
Return on Assets |
11.44% |
7.05% |
10.67% |
14.16% |
Neutral |
|
Return on Equity |
22.34% |
9.06% |
14.32% |
20.83% |
Positive |
Based on your calculations and comparisons above, how would you characterize East Coast YachtAc€?cs performance relative to its industry?
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