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Problem 12 92A Preparation of Ratios The financial statements for Burch Industries follow Burch Industries Consolidated Income Statements (in thousands, except per share data) Year ended December 31, 2017 2019 2018 $3,405,211 $3,003,610 Revenues $3,930,984 Costs and expenses: $2,386,993 Cost of goods sold $2,089,089 $1,850,530 761,498 664,061 922,261 Selling and administrative 27,316 25,739 30,665 Interest (43) 1,475 2,141 Other expenses (income) $2,541,864 $3,336,468 $2,883,393 Total costs and expenses $461,746 $594,516 $521,818 Income before income taxes 174,700 192,600 229,500 Income taxes $287,046 $329,218 $365,016 Net income Calculator Print Item Burch Industries Consolidated Balance Sheets (in thousands) December 31, ASSETS 2019 2018 Current assets: Cash and equivalents $291,284 $260,050 Accounts receivable, less allowance for doubtful accounts of 667,547 596,018 $19,447 and $20,046 Inventories 592,986 471,202 Deferred income taxes 26,378 27,511 Prepaid expenses 42,452 32,977 Total current assets $1,620,647 $1,387,758 Property, plant, and equipment $571,032 $497,795 Less accumulated depreciation (193,037) (151,758) Net property, plant, and equipment $377,995 $346,037 Goodwill 157,894 110,363 Other assets 30,927 28,703 Total assets $2,187,463 $1,872,861 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Check My Work LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: $3,652 $52,985 Current portion of long-term debt 108,165 105,696 Notes payable 134,729 135,701 Accounts payable 134,089 138,563 Accrued liabilities 42,422 17,150 Income taxes payable $452,564 $420,588 Total current liabilities 77,022 15,033 Long-term debt 27,074 29,965 Noncurrent deferred income taxes 23,728 43,575 Other noncurrent liabilities > Commitments and contingencies 0 300 300 Redeemable preferred stock $548,712 $541,437 Total liabilities Stockholders' equity: Common stock at stated value: $161 $159 Class A convertible-26,691 and 26,919 shares outstanding 2,716 2,720 Class B-49,161 and 48,591 shares outstanding 93,799 108,451 Capital in excess of stated value Check My Work Priet item 2019 2018 Average number of common shares outstanding 2017/ 77,063 76,602 76,067 Accounts receivable, net $667,547 $596,018 $521,588 Inventories 592,986 471,202 586,594 Total assets 2,187,463 1,872,861 1,708,430 Stockholders' equity 1,646,026 1,324,149 1,032,789 Stock repurchases 930,111 581,134 288,320 Cash flows from operating activities 190,000 150,000 137,000 Common dividends paid 57,797 45,195 39,555 Dividends per common share 0.75 0.59 0.52 Market price per share: High 90.25 77.45 54.50 Low 35.12 26.00 55.00 Close 86.33 71.65 43.22 Year ended December 31, 2018 2019 Industry Averages 23.04% 25.98% Return on equity 0.04 0.05 profit margin 2.56 2.24 Asset turnover 2 25 2.32 I auerane Check My Work Prite Year ended December 31, Industry Averages 2019 2018 Return on equity 25.98% 23.04% profit margin 0.05 0.04 Asset turnover 2.24 2.56 Leverage 2.32 2.25 Required: 1. Prepare all the financial ratios for Burch for 2019 and 2018. In your computations, round the tax rate to three decimal places (le: 4693 decimal places. 2019 2018 Short-Term Liquidity Ratios: Current ratio 3.58 3.30 Quick ratio 2.12 2.04 Cash ratio 0.64 0.62 Operating cash flow ratio 0.42 0.36 Debt Management Ratios: Times interest earned ratio (Accrual Basis) Check My Work Debt Management Ratios: Times interest earned ratio (Accrual Basis) Long-term debt to equity ratio 0.04 0.06 Debt to equity ratio 0.33 0.41 Long-term debt to total assets ratio 0.03 0.04 Debt to total assets ratio 0.25 0.29 V Asset Efficiency Ratios: Accounts receivables turnover ratio 6.22 6.09 Inventory turnover ratio 4.49 3.95 > Asset turnover ratio 1.94 1.90 V Profitability Ratios: Gross profit percentage 39.28 V% 38.65 % Operating margin percentage 9% % % Net profit margin percentage 9.29 9.67 96 Return on assets ratio 24.58 27.94 % % Return on equity ratio Stockholder Ratios: Check My Work 49c0 Stockholder Ratios: Print m Earnings per share (EPS) 4.74 430 Return on common equity 24.58 % 27.94 % Dividend yield ratio 0.87 % 0.82 % Dividend payout ratio 15.83 % 13.73 9% Total payout ratio 270.65 % 190.25 % Stock repurchase payout 254.81 176.52 % % 2. Conceptual Connection: Is Burch's short-term liquidity adequate? Yes 3. Conceptual Connection: Is Burch using its assets efficiently? Yes, because receivables and inventory turnovers appear strong. 4. Conceptual Connection: Determine whether Burch is profitable. Yes 5. Conceptual Connection: Discuss whether long-term creditors should regard Burch as a high-risk or a low-risk firm. Low-risk 6. Perform a Dupont analysis for 2018 and 2019. Round your intermediate calculations and final answers to two decimal places Dupont Analysis Check My Work Dividend yield ratio 0.87 % 0.82 % Dividend payout ratio 15.83 V% V% 13.73 Total payout ratio 270.65 % 190.25 Stock repurchase payout 176.52 % 254.81 % 2. Conceptual Connection: Is Burch's short-term liquidity adequate? Yes 3. Conceptual Connection: Is Burch using its assets efficiently? Yes, because receivables and inventory turnovers appear strong. 4. Conceptual Connection: Determine whether Burch is profitable. Yes > 5. Conceptual Connection: Discuss whether long-term creditors should regard Burch as a high-risk or a low-risk firm. Low-risk 6. Perform a Dupont analysis for 2018 and 2019. Round your intermediate calculations and final answers to two decimal places. Dupont Analysis % 2019 % 2018 Check My Work

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