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Cranston Dispensers

Income Statement

($ in thousands)

Account	2014	2013	2012
Sales	3,784	3,202	2,760
Cost of Goods Sold	2,568	2,172	1,856
Gross Profit	1,216	1,030	904
Selling & Administrative	550	478	406
Depreciation	247	230	200
Earnings Before Interest and Taxes	419	322	298
Interest Expense	20.50	24.70	14.30
Taxable Income	398.50	297.30	283.70
Taxes	119.55	89.19	85.11
Net Income	278.95	208.11	198.59

Balance Sheet

($ in thousands)

Account	20x5	20x4	20x3
Current Assets
Cash	341	276	236
Accounts Receivable	722	642	320
Inventory	595	512	388
Total Current Assets	1,658	1,430	944
Net Fixed Assets	1,822	1,691	1,572
Total Assets	3,480	3,121	2,516
Current Liabilities
Accounts Payable	332	288	204
Accrued Expenses	343	335	192
Short-term Notes	503	491	243
Total Current Liabilities	1,178	1,114	639
Long-term Debt	398	324	289
Other Long-term Liabilities	239	154	147
Total Liabilities	1,815	1,592	1,075
Owners Equity
Common Equity	1,665	1,529	1,441
Total Liabilities & Equity	3,480	3,121	2,516

Additional information:

	2014	2013	2012
Stock price per share	33$	38$	32$
Dividend stock share	$1.00	0.84$	0.70$
Shares outstanding	143	143	143

1. Following are cranstons common size income statements and balance sheets for 2013 and 2012. Prepare a common-size income statement and balance sheet for 2014.

2. Complete the 2014 table of financial ratios for Cranston

	2014	2013	2012	Industry Averages 2014
Liquidity Ratios
Current ratio		1.28	1.48	2.10
Quick ratio or acid ratio test		0.82	0.87	1.10
Cash Ratio		.25	.37	.39
Financial leverage ratios
Debt ratio		.51	.42
Time interest earned ratio		13.04	20.84	19.00
Cash coverage ratio		22.35	34.83	35.00
Asset management ratios
Inventory turnover		4.24	4.78	5.20
Days sales in inventory		86.04	76.30	70.19
Receivables turnover		4.99	8.63	6.81
Days sales in receivables		73.18	42.32	53.60
Total asset turnover		1.03	1.10	1.80
Profatibility margins
Profit margin		6.5%	7.2%	8.6%
Return on total assets		6.67%	7.89%	15.48%
Return on equity		13.61%	13.78%	20.59%
Market value ratios
Earnings per share		1.46	1.39	Not meaningful
Price earnings ratio		26.11	23.04	21.00
Earnings growth rate		4.79%	17.45%	18.00%
PEG ratio		5.45	1.32	1.17
Book value		$10.69	$10.08	Not meaningful
Merket to book value ratio		3.55	3.18	4.26

3. Use the common size statements and the ratio analysis tat you have prepared to comment on cranstons

a. liquidity

b. solvency

c. asset management

d. profitability

e. market performance.

Indicate whether they are better or worse than the 2014 averages

4. Express cranstons ROE in terms of the DuPont identity. Which ratios are contributing to Cranstons below average ROE?

5. Based on your analyses in questions 1 through 4, why do you think cranstons recent stock performance has been disappointing?

Answer & Explanation Solved by verified expert

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