ABC Corporation Company is planning to apply for long-term debt from a bank.

For this purpose

company is calculating some key ratios to satisfy the bank at the same time some key ratios to
grasp some potential investors. You are provided with the recent financial statements of the
company and asked to calculate:

ABC Corp.
Balance Sheet ($ in Millions)
Assets 2010 2009 Liabilities 2010 2009
Cash & Cash Equivalents 140 107 Accounts Payables 213 197
Accounts Receivables 294 270 Notes Payable 50 53
Inventories 269 280 Accrued Expenses 223 205
Others 58 50 Others 0 0
Total Current Assets 761 707 Total Current Liabilities 486 455
Fixed Assets Long-Term Liabilities
Plant & Equipment 1423 1274 Deferred Taxes 117 104
Less: Acc. Depreciation -550 -460 Long-Term Debt 471 458
Net Plant 873 814 Total Long-term Liabilities 588 562
Intangible Assets 245 221 Shareholders Equity
Total Fixed Assets 1118 1035 Preferred Stock 39 39
Common Stock* 55 32
Capital Surplus 347 327
Retained Earnings 390 347
Less: Treasury Stock -26 -20
Total Equity 805 725

Total Assets 1879 1742 Total Liabilities 1879 1742
*The company has 29 million shares outstanding with market price of 5 per share.

ABC Corp.
Income Statement ($ in Millions)
Total Revenues 2262
Cost of Goods Sold -1655
Selling, General and Marketing Expenses -327
Depreciation -90
Operating Income 190
Other Income 29
EBIT 219
Less: Interest -49
EBT 170
Tax Expenses -84
Net Income 86

ABC Corp.
Sources & Uses Statement ($ in millions)
Cash From Operations
Net Income 86
Depreciation 90
Deferred Tax 13
Increase In A/R -24
Decrease In Inventories 11
Increase In A/P 16
Increase in Accrued Exp 18
Decrease in Notes Payable -3
Others -8
Net Cash From Operations 199
Cash From Investing
Acquisition of Fixed Assets -198
Sale of fixed assets 25
Net Cash From Investing -173
Cash From Financing
Retirement of Debt -73
Proceeds from long-term Debt 86
Dividends -43
Purchase of Stocks -6
Proceeds from new stocks 43
Net Cash from Financing 7
Net Change in Cash (in Balance Sheet) 33


CALCULATION OF KEY RATIOS

1. Cash cycle of ABC Corporation
Formula:-
Cash Cycle= Accounts Receivable days + Inventory days - Accounts Payable days
= 45.5 days + 44.3 days 45.1 days
Cash Cycle = 45 days

a) Working for Accounts Receivable Days:-
Accounts Receivable Turnover ratio =

= 8.02 X
Average Accounts Receivable =

= 282
Accounts Receivable days =
= 45.5 days


b) Working for Inventory Days:-
Inventory Turnover ratio =
=
= 8.24 X
Average Inventory =

= 274.5
Inventory Days =
= 44.3 days

c) Working for Accounts Payable:-
Accounts Payable Turnover Ratio =



=
= 8.1 X
Average Accounts Payable =

= 205
Accounts Payable Days =
= 45.1 days

2. TIE Ratio
Formula:-
TIE Ratio =

=
TIE Ratio= 4.46 X
3. Return on Assets (ROA)
Formula:-
Return on Assets =



=

=0.05100
Return on Assets = 5%
Working of Total Assets:-
Average Total Assets =

= 1811
4. Earning per share
Formula:-
Earning Per Share =



=

Earning Per Share =$ 2.96
5. Debt to Equity Ratio
Formula:-
Debt to Equity Ratio =

=0.61100
Debt to Equity = 61%
I. Calculation of Long Term Debt :-
Average Long Term Debt =

= 465
II. Calculation of Equity :-
Average Total Equity =

= 765
6. Price to Earning Ratio
Formula:-
Price to Earning Ratio =



=

Price to Earning Ratio= $1.689
7. Payout Ratio
Formula:-
Payout Ratio =



=

=0.05100
Payout Ratio = 5 %
8. DUPONT Analysis
Formula:-
DUPONT Analysis =

=0.112100
DUPONT Analysis =11.2%