BRICS and Co

Balance Sheet
At December 31, years 2021 & 2022

2021 2022
Current assets
Cash and cash equivalents 42,000 62,500
Trading securities (at FMV) 78,000 69,250
Accounts receivable 510,000 425,000
(Less allowance for uncollectible A/R) (42,000) (41,000)
Inventory 281,675 321,000
Prepaid expenses 7,200 3,000
Total current assets 876,875 839,750

Fixed assets
Property, plant and equipment 2,160,000 2,375,000
(less accumulated depreciation) (180,000) (225,000)
Goodwill and intangible assets 42,000 37,500
Total fixed assets 2,022,000 2,187,500

Total assets 2,898,875 3,027,250

Current liabilities
Accounts payable 150,000 171,750
Notes payable 450,000 419,250
Accrued liabilities 240,000 275,000
Total current liabilities 840,000 866,000
Noncurrent liabilities
Bonds payable 720,000 707,500
Total noncurrent liabilities 720,000 707,500
Total liabilities 1,560,000 1,573,500
Stockholders' equity
Common stock 480,000 480,000
Additional paid-in capital 584,000 584,000
Retained earnings 274,875 389,750
Total stockholders' equity 1,338,875 1,453,750

Total liabilities and stockholders' equity 2,898,875 3,027,250

BRICS and Co
Income statement
For years ending December 31, years 2021 & 2022

2021 2022
Sales 2,040,000 2,250,000
Cost of goods sold 1,128,000 1,250,000
Gross profit 912,000 1,000,000
Selling, general and admin 172,000 180,000
Research & development 215,000 175,000
Depreciaiton expense 30,000 75,000
Operating income/loss 495,000 570,000
Interest expenses 62,000 65,000
Income before income tax 433,000 505,000
Income tax expense 151,550 176,750
Net income 281,450 328,250

Outstanding shares 1,000,000

Dividend per share $ 0.21338
Dividend pay 213,375
Current market, $/share $ 5.00 $ 5.30

R/E at January 1, 2022 274,875

net income 2022 328,250
2022 dividend (213,375)
R/E at December 31, 2022 389,750
 2018 2019 2020 2021 2022
Sales 1,505,000 1,685,000 1,878,000 2,040,000 2,250,000
COGS 844,000 928,000 1,048,000 1,128,000 1,250,000
Gross profit 661,000 757,000 830,000 912,000 1,000,000
Gross profit margin 43.92% 44.93% 44.20% 44.71% 44.44%

Trend analysis
2,500,000

2,000,000

1,500,000

1,000,000

500,000

-
2018 2019 2020

Sales COGS Gross profit Gross profit marg

ysis
45.20%

45.00%

44.80%

44.60%

44.40%

44.20%

44.00%

43.80%

43.60%

43.40%
2021 2022

ofit Gross profit margin

To assess the company's ability to meet ist short-term obligations

Current Assets
Current ratio
Current Liabilities

Cash + ST marketable securities+Net receivables

Quick (acid test) ratio
Current Liabilities

Current assets - prepaid expenses - inventory

Alternatively
Current Liabilities

Cash + Marketable securities

Cash ratio
Current Liabilities

Net working capital Current Assets - Current liabilities

Net working capital

Net working capital to total assets
Total assets

Current assets
Interval measure
Average daily operating costs
 2021 2022

876,875 839,750 higher better

1.04 0.97
840,000 866,000

588,000 515,750 for each dollar that I owe to my creditors

0.70 0.60
840,000 866,000 I have 70 cents in quick money

588,000 515,750
0.70 0.60
840,000 866,000

120,000 131,750 a very short term creditor is interested

0.14 0.15
840,000 866,000

36,875 (26,250)

36,875 (26,250)
0.01 (0.01)
2,898,875 3,027,250

876,875 839,750 how long could the business keep runing? (strike, force majuer
283.74 245.21
3,090 3,425
ing? (strike, force majuere, etc)
 COGS
Inventory turnover
Inventory

365 days
Days' sales in inventory
Inventory turnover

Sales
Receivables turnover
Accounts recievable

365 days
Days' sales in in receivables
Receivable turnover

COGS
Payables turnover
Accounts payable

365 days
Days' payables in purchases
Payables turnover

Sales
NWC turnover
NWC

Sales
Fixed asssets turnover
Fixed assets

Sales
Total asset turnover
Total assets
 2021 2022

1,128,000 1,250,000 how efficiently we manage inventory

4.00 3.89
281,675 321,000

365 365
91.14 93.73
4.00 3.89

2,040,000 2,250,000 how efficiently we manage receivables

4.36 5.86
468,000 384,000

365 365 (ACP) average collection period

83.74 62.29
4.36 5.86

1,128,000 1,250,000
7.52 7.28
150,000 171,750

365 365
48.54 50.15
8 7

2,040,000 2,250,000 how efficiently we use our NWC

55.32 (85.71)
36,875 (26,250)

2,040,000 2,250,000
1.01 1.03
2,022,000 2,187,500

2,040,000 2,250,000
0.70 0.74
2,898,875 3,027,250
 2021 2022

Total Debt 1,560,000 1,573,500

Total debt ratio 0.54
Total assets 2,898,875 3,027,250

Total Debt 1,560,000 1,573,500

Deb-equity ratio 1.17
Total Equity 1,338,875 1,453,750

Total Assets 2,898,875 3,027,250

Equity multiplier 2.17
Total Equity 1,338,875 1,453,750

Long-term debt 720,000 707,500

Long-term debt ratio 0.35
Total Equity+Long-term debt 2,058,875 2,161,250

EBIT 495,000 570,000

Times interest earned 7.98
Interest 62,000 65,000

EBIT + Depreciation 525,000 645,000

Cash coverage 8.47
Interest 62,000 65,000
2022

0.52

1.08

2.08

0.33

8.77

9.92
 2021

Net income 281,450

Profit margin
Sales 2,040,000

Net income 281,450

Return on assets (ROA)
Total assets 2,898,875

Net income 281,450

Return on eqity (ROE)
Total equity 1,338,875

ROE Net income x Assets Net income

= X
Total equity x Assets Assets

Sales
= X
Sales

Du Pont identity
2021 2022

328,250
0.14 0.15
2,250,000

328,250
0.10 0.11
3,027,250

328,250
0.21 0.23
1,453,750

Assets
= ROA X Equity multiplier
Total equity

Net income Assets Net income Sales Assets

X = X X
Assets Total equity Sales Assets Total equity

Profit Margin X Asset turnover X Equity multiplier

 2021 2022

Net income 281,450 328,250

EPS (earnings per share) 0.28 0.33
Shares outstanding 1,000,000 1,000,000

Price per share 5,000,000 5,300,000

PE (price to earnings) 17.77 16.15
Net income 281,450 328,250
ABC Company
Balance sheet at
horizontal
2021/12/31 2022/12/31 $ change % change

Current assets
Cash 84 98 14 16.67%
Accounts receivable 165 188 23 13.94%
Inventory 393 422 29 7.38%
Total current assets 642 708 66 10.28%

Fixed assets
Plant and equipment 2,731 2,880 149 5.46%

TOTAL ASSETS 3,373 3,588 215 6.37%

Current liabilities
Accounts payable 312 344 32 10.26%
Notes payable 231 196 (35) -15.15%
Total current liabilities 543 540 (3) -0.55%

Long-term liabilities
Bonds payable 531 457 (74) -13.94%

Total liabilities 1,074 997 (77) -7.17%

Stockholders equity
Common stock 400 400 - 0.00%
Additional paid in capital 100 150 50 50.00%
Retained earnings 1,799 2,041 242 13.45%
Total stockholders equity 2,299 2,591 292 12.70%

TOTAL LIABILITIES & STOCKHOLDERS EQUITY 3,373 3,588 215 6.37%

test - -
 vertical comments
% change 2021 % change 2022

2.49% 2.73%
4.89% 5.24% A/R has gone upby a higher degree than the sales
11.65% 11.76% Inventory has gone up by a higher degree.
19.03% 19.73%

80.97% 80.27% new equipment purchase. Investment plan? Expansion?

100.00% 100.00%

29.05% 34.50%
21.51% 19.66%
50.56% 54.16%

49.44% 45.84%

100.00% 100.00%
Assets = Liabilities + Stockholders' Equity
Assets - Liabilities = SH Equity
ABC Company
Income statement for years ended
horizontal vertical
2021/12/31 2022/12/31 $ change % change % change 2021

Sales 2,290 2,311 21 0.92% 100.00%

Cost of goods sold 1,301 1,344 43 3.31% 56.81%
Gross profit 989 967 (22) -2.22% 43.19%
Depreciation 200 276 76 38.00% 8.73%
Earnigs before interest and taxes 789 691 (98) -12.42% 34.45%
Interest paid 150 141 (9) -6.00% 6.55%
Taxable income 639 550 (89) -13.93% 27.90%
Taxes (34%) 217 187 (30) -13.93% 9.49%
Net income 422 363 (59) -13.93% 18.42%
vertical
% change 2022

100.00%
58.16%
41.84%
11.94%
29.90%
6.10%
23.80%
8.09%
15.71%
ABC Company
Balance sheet at

2021/12/31 2022/12/31

Current assets
Cash 84 98
Accounts receivable 165 188
Inventory 393 422
Total current assets 642 708

Fixed assets
Plant and equipment 2,731 2,880

TOTAL ASSETS 3,373 3,588

Current liabilities
Accounts payable 312 344
Notes payable 231 196
Total current liabilities 543 540

Long-term liabilities
Bonds payable 531 457

Total liabilities 1,074 997

Stockholders equity
Common stock 400 400
Additional paid in capital 100 150
Retained earnings 1,799 2,041
Total stockholders equity 2,299 2,591

TOTAL LIABILITIES & STOCKHOLDERS EQUITY 3,373 3,588

test - -
ABC Company
Income statement for years ended

2021/12/31 2022/12/31

Sales 2,290 2,311

Cost of goods sold 1,301 1,344
Gross profit 989 967
Depreciation 200 276
Earnigs before interest and taxes 789 691
Interest paid 150 141
Taxable income 639 550
Taxes (34%) 217 187
Net income 422 363
 Liquidity Ratios 2021

Current Assets 642

Current ratio
Current Liabilities 543

Cash + ST marketable securities+Net receivables 249

Quick (acid test) ratio
Current Liabilities 543

Current assets - prepaid expenses - inventory 249

Alternatively
Current Liabilities 543

Cash + Marketable securities 84

Cash ratio
Current Liabilities 543

Net working capital Current Assets - Current liabilities 99

Net working capital 99

Net working capital to total assets
Total assets 3,373

Current assets 642

Interval measure
Average daily operating costs 4

Activity Ratios

COGS 1,301
Inventory turnover
Inventory 393

365 days 365

Days' sales in inventory
Inventory turnover 3.31

Sales 2,290
Receivables turnover
Accounts recievable 165

365 days 365

Days' sales in in receivables
Receivable turnover 13.88

COGS 1,301
Payables turnover
Accounts payable 312

365 days 365

Days' payables in purchases
Payables turnover 4.17
 Sales 2,290
NWC turnover
NWC 99

Sales 2,290
Fixed asssets turnover
Fixed assets 2,731

Sales 2,290
Total asset turnover
Total assets 3,373
2021 2022

708
1.18 1.31
540

286
0.46 0.53
540

286
0.46 0.53
540

98
0.15 0.18
540

168

168
0.03 0.05
3,588

708
180.12 192.28
4

1,344
3.31 3.18
422

365
110.26 114.61
3.18

2,311
13.88 12.29
188

365
26.30 29.69
12.29 These are our customers

1,344
4.17 3.91
344

365
87.53 93.42
3.91 These are our vendors
 2,311
23.13 13.76
168

2,311
0.84 0.80
2,880

2,311
0.68 0.64
3,588
ABC Company
Balance sheet at

2021/12/31 2022/12/31

Current assets
Cash 84 98
Accounts receivable 165 188
Inventory 393 422
Total current assets 642 708

Fixed assets
Plant and equipment 2,731 2,880

TOTAL ASSETS 3,373 3,588

Current liabilities
Accounts payable 312 344
Notes payable 231 196
Total current liabilities 543 540

Long-term liabilities
Bonds payable 531 457

Total liabilities 1,074 997

Stockholders equity
Common stock 400 400
Additional paid in capital 100 150
Retained earnings 1,799 2,041
Total stockholders equity 2,299 2,591

TOTAL LIABILITIES & STOCKHOLDERS EQUITY 3,373 3,588

test - -
ABC Company
Income statement for years ended

2021/12/31 2022/12/31

Sales 2,290 2,311

Cost of goods sold 1,301 1,344
Gross profit 989 967
Depreciation 200 276
Earnigs before interest and taxes 789 691
Interest paid 150 141
Taxable income 639 550
Taxes (34%) 217 187
Net income 422 363

Outstanding shares 400 400

Current market, $/share $ 20.00 $ 21.00
8,000 8,400
 Solvency Ratios 2021

Total Debt 1,074

Total debt ratio
Total assets 3,373

Total Debt 1,074

Deb-equity ratio
Total Equity 2,299

Total Assets 3,373

Equity multiplier
Total Equity 2,299

Long-term debt 531

Long-term debt ratio
Total Equity+Long-term debt 2,830

EBIT 789
Times interest earned
Interest 150

EBIT + Depreciation 989

Cash coverage
Interest 150

Profitability Ratios

Net income 422

Profit margin
Sales 2,290

Net income 422

Return on assets (ROA)
Total assets 3,373

Net income 422

Return on eqity (ROE)
Total equity 2,299

Du Pont identity Profit Margin x Asset Turnover x Equity multiplier 18%

asset turnover 2021 0.678920841980433
asset turnover 2022 0.644091415830546

Market Value ratios

Net income 422

EPS (earnings per share)
EPS (earnings per share)
Shares outstanding 400

Shares market value

PE (price to earnings)
Net income

Price of one share 20

PE (price to earnings)
EPS 1.05
2021 2022

997
0.32 0.28
3,588

997 A = L+SE
0.47 0.38
2,591 SE = A - L

3,588
1.47 1.38
2,591

457
0.19 0.15
3,048

691
5.26 4.90
141

967
6.59 6.86
141

363 10000 3% 300

18% 16%
2,311

363
13% 10%
3,588

363
18% 14%
2,591

14%

363
1.05 0.91
 1.05 0.91
400

21
18.97 23.14
0.91 4% yr 2022
5% yr 2021
Each of these companies have requested $50,000 credit line for 6 months with no collateral offered. The bank has
Only one of these requests can be granted. If you were a loan officer in this bank, which company would approve f

Balance sheets

Company A Company B

Current assets
Cash 120,000 320,000
Accounts receivable 220,000 302,000
Inventory 570,000 518,000
Total current assets 910,000 1,140,000

Fixed assets
Plant and equipment 500,000 612,000

TOTAL ASSETS 1,410,000 1,752,000

Current liabilities 305,000 350,000

Long-term liabilities 400,000 500,000

Total liabilities 705,000 850,000

Stockholders equity
Common stock 5,000 5,000
Retained earnings 700,000 897,000
Total stockholders equity 705,000 902,000

TOTAL LIABILITIES & STOCKHOLDERS EQUITY 1,410,000 1,752,000

test - -
s with no collateral offered. The bank has reached its quota for loans of this type
his bank, which company would approve for the loan?

Income statements

Company A Company B

Sales 930,000 1,500,000

Gross profit % 30% 40%
Fisk Co Fisk Co
Balance sheet Income statement

Assets 8900 Sales 16000

Costs 12500
Debt 5100 Net income 3500
Equity 3800
Total debt and equity 8900

Fisk has predicted a sales increase of 10%.

It has predicted that every item on the balance sheet will increase by 10%.
Create the pro forma financial statements? What is the plug variable here?

Assume Fisk pays out 50% of net income as dividend

How much of financing is necessary?

Jordan corp
Income statement

Sales 29000
Costs 11200
Taxable income 17800
Taxes 34% 6052
Net income 11748

Dividends 4935
Addition to retained earnings 6813

20% growth rate in sales is projected

Prepare proforma income statement
Costs vary with sales
Dividend payout ratio is consistent

What is the projected addition to retained earnings?

Jordan corp
Balance sheet

Current assets
Cash 3,525
Accounts receivable 7,500
Inventory 6,000
Total current assets 17,025

Fixed assets
Plant and equipment 30,000

TOTAL ASSETS 47,025

Current liabilities
Acounts payable 3,000
Notes payable 7,500
Total current liabilities 10,500

Long-term liabilities 19,500

Total liabilities 30,000

Stockholders equity
Common stock 15,000
Retained earnings 2,025
Total stockholders equity 17,025

TOTAL LIABILITIES & STOCKHOLDERS EQUITY 47,025

Prepare prof forma balance sheet using the percentage of sales approach
Accounts payable vary with sales
Notes payable do not vary with sales
17600
15000
2600
2021 income statement Balance sheet at 12/31/21

Sales 905,000 Assets

Costs 710,000 cash
other expenses 12,000 accounts receivable
EBIT 183,000 inventory
interest expense 19,700 Total
Taxable income 163,300
Taxes 35% 57,155 Fixed assets
Net income 106,145
TOTAL ASSETS
Dividends 42,458
Addition to retained earnings 63,687 Liabilities and owners' equity

Current liabilities
Accounts payable
Notes payable
Total

Long-term debt

Owners' equity
commons stock
retained earnings
Total

TOTAL LIABILITIES AND OWNERS' EQ

Sales for 2022 are projected to grow by 20%

Interest expense will remain constant
Tax rate and dividend payout ratio constant
Costs, other expenses, current assets, and accounts payable increase with the sales
Firm operates at full capacity.
No new debt or equity is issued
EFN ?
heet at 12/31/21

25,000
unts receivable 43,000
76,000
144,000

364,000

508,000

and owners' equity

unts payable 65,000

9,000
74,000

156,000

21,000
ned earnings 257,000
278,000

ABILITIES AND OWNERS' EQUITY 508,000