Hermetic, Inc., Balance Sheet (as of December 31) 2013 2014 Assets Current asset
ID: 2741280 • Letter: H
Question
Hermetic, Inc., Balance Sheet (as of December 31) 2013 2014 Assets Current assets Cash Accounts receivable Inventory S 45 270 320 S 635 s 50 290 365 S 705 Total Fixed assets Net plant and equipment Total assets Liabilities and equity Accounts payable 985 1620 2002 1100 180 2003 litie $ 210 110 320 260 175 S 435 Notes payable Total 215 185 Long-term debt 0c Common stock and paid-in surplus Retained earnings 290 795 290 895 Total S108 S1620 1805 Total liabilities and equity Income Statement (2014) Net sales Cost of goods sold Depreciation Earnings before interest and taxes (EBIT) Interest Taxable income Taxes Net income $710.00 480.00 $200.00 20.00 180.00 S126.55 Retained earnings $100.00 Dividends 26.55Explanation / Answer
a)
Cash flow to creditors = $20.00 (Interest paid) – $20.00 (Net new borrowing) = $ 0.00
Cash flow to stockholders = $26.55 (Dividends paid) - $0.00 (Net new equity raised) = $26.55
Operating cash flow = $ 200.00 (EBIT) + 30.00 (Depreciation) – 53.45 (Taxes) = $ 176.55
Change in net working capital = $ 310.00 (Ending net working capital) – $305.00(Beginning net working) capital = $ 5.00
b)
Current Ratio = Current assets/current liabilities = 705/435 = 1.62
Total assets turnover ratio = Sales/Total assets = 710/1805 = 0.39
Total debt ratio = Total liabilities/Total assets = (435+185)/1805 = 0.34
Days sales in receivables = (Receivables*365)/Sales = (290*365)/710 = 149 days
Times interest earned ratio = EBIT/Interest = 200/20 = 10
Profit margin = Net Income/Sales = 126.55/710 = 17.82%
ROA = EBIT (1-t)/Total assets = 200*(1-0.2969)/1805 = 140.62/1805 = 7.79%
ROE = Net Income/Equity = 126.55/1185 = 10.68%
c)
IGR = (ROA*b)/(1- ROA*b), where b is retention ratio
= (0.0779*0.7902)/(1-0.0779*0.7902) = 0.06559 = 6.56%
Retention ratio = 100/126.55 = 0.7902
SGR = (ROE*b)/(1 – ROE*b) = (0.1068*0.7902)/(1-0.1068*0.7902) = 0.09217 = 9.22%
d) EPS = Net Income/# shares outstanding = 126.55/100 = $1.27
DPS = Total dividend/# shares = 26.55/100 = $0.27
PE ratio = Market Price per share/EPS = 18/1.27 = 14.17
Market to Book ratio = Market value per share/Book value per share = 18/11.85 = 1.52
EBITDA ratio = EBITDA/Sales = (200+30)/710 = 32.39%