Problems
1. Income statement.Fill in the missing numbers on the following annual income
statements for Barron Pizza Inc.
ANSWER
Revenue
Year Ending 2014
($‘000s)
Year Ending 2013
($‘000s)
$917,378
$946,219
COGS
$669,382
Year Ending 2012
($‘000s)
$656,215
Gross Profit
$169,441
$315,017
SG&A
$70,505
$193,000
Research & Dev.
$5,469
Depreciation
Operating Income
$60,540
Other Income
$672
$34,579
$35,713
$1,958
$82,553
$6,851
$84,741
$8,857
Income Before Tax
Taxes
$3,521
$81,427
EBIT
Interest Expense
$7,129
$74,876
$20,385
$75,884
$28,079
Net Income
$46,797
Shares Outstanding
16,740,000
EPS
$2.03
$47,245
16,740,000
$2.78
2. Income statement. Construct the Barron Pizza Inc. income statement for the year
ending 2015 with the following information:
Shares outstanding: 16,740,000
Tax rate: 37.5%
Interest expense: $6,114
Revenue: $889,416
Depreciation: $31,354
Selling, general, and administrative expense: $77,572
Other income: $1,253
Research and development: $4,196
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462Brooks ◼Financial Management: Core Concepts, 3e
Cost of goods sold: $750,711
3. Balance sheet.Fill in the missing information on the annual Balance Sheets
Statements for Barron Pizza Inc.
ANSWER
All $ in Thousands
At Dec. 31,
2014
At Dec. 31,
2013
At Dec. 31,
2012
Cash
$7,071
$9,499
$17,609
Accts. Receivables
$26,767
ASSETS
Inventory
$25,877
$16,341
Other Current
$11,590
$10,955
Total Current
$62,458
$57,433
Long Term Invest.
$19,102
Net PP&E
$203,818
Goodwill
$12,659
$65,131
$20,998
$223,599
$48,756
$48,274
Other Assets
$13,259
$13,817
$14,091
TOTAL ASSETS
$347,214
$365,469
$387,439
$74,467
$66,209
LIABILITIES
Accounts Payable
Short Term Debt
$250
Current Liab.
$80,917
Long Term Debt
$61,000
Other Liab.
TOTAL LIAB.
$225
$74,702
$185,085
$28,970
$187,942
$20,288
$243,522
Owner’s Equity
Common Stock
Retained Earnings
$102,421
$39,371
Total OE
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$102,107
$13,525
Chapter 14 ◼ Financial Ratios and Firm Performance 463
TOTAL LIAB &
OE
$347,214
$365,469
4. Balance sheet. Construct the Barron Pizza Inc. balance sheet statement for
December 31, 2015, with the following information:
Retained earnings: $43,743
Accounts payable: $74,633
Accounts receivable: $34,836
Common stock: $119,901
Cash: $8,344
Short-term debt: $210
Inventory: $23,455
Goodwill: $48,347
Long-term debt: $80,207
Other noncurrent liabilities: $42,580
Plant, property, and equipment: $192,465
Other noncurrent assets: $16,838
Long-term investments: $22,331
Other current assets: $14,658
5. Predicting net income. Below is an abbreviated income statement for Wal-Mart.
Predict the net income for the period ending January 31, 2015, by determining the
growth rates of sales, COGS, SG&A, and interest expense. Use a tax rate of 37%.
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464Brooks ◼Financial Management: Core Concepts, 3e
6. Predicting net income. Below are abbreviated income statements forStarbucks. The
year ending September 30, 2013, included a large nonrecurringloss of $2,784
(million). Redo the 2013 income statement removingthis nonrecurring loss from the
SG&A + Other category and recalculatingthe taxes at 37% (removing the tax credit).
With this new proforma income statement for 2013, predict the net income for the
periodending September 30, 2014, by determining the growth rates of sales,COGS,
SG&A, and interest expense. Use a tax rate of 37%. Then look upthe numbers for
Starbucks for 2014 and see how you did.
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Chapter 14 ◼ Financial Ratios and Firm Performance 465
7. Common-size financial statements. Prepare common-size income statements for
Wal-Mart and Starbucks using the January 2014information for Walmart and your
new pro forma September 2013 information for Starbucks provided in Problems 5
and 6.Which company is doing a better job of getting sales dollars to net income?
Where is the one company having an advantage over the other company in turning
revenue into net income?
8. Common-size financial statements. Below is the balance sheet information on two
companies. Prepare a common-size balance sheet for each company.Review each
company's percentage of total assets. Are these companies operating with similar
philosophies or in similar industries? What appears to be the major difference in
financing for these two companies?
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466Brooks ◼Financial Management: Core Concepts, 3e
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Chapter 14 ◼ Financial Ratios and Firm Performance 467
For Problems 9 through 12, use the following data:
9. Financial ratios: Liquidity. Calculate the current ratio, quick ratio, and cash ratio for
Tyler Toys for 2013 and 2014. Should any of these ratios or the change in a ratio
warrant concern for the managers of Tyler Toys or the shareholders?
10.
Financial ratios: Financial leverage. Calculate the debt ratio, times interest
earned ratio, and cash coverage ratio for 2013 and 2014 for Tyler Toys. Should any of
these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the
shareholders?
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468Brooks ◼Financial Management: Core Concepts, 3e
11. Financial ratios: Asset management. Calculate the inventory turnover, days’ sales in
inventory, receivables turnover, days’ sales in receivables, and total asset turnover
ratios for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a
ratio warrant concern for the managers of Tyler Toys or the shareholders?
12. Financial ratios: Profitability. Calculate the profit margin, return on assets, and
return on equity for 2013 and 2014 for Tyler Toys. Should any of these ratios or the
change in a ratio warrant concern for the managers of Tyler Toys or the shareholders?
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