Tribke Enterprises collected the following data from its financial reports for 2012:
Stock price $18.37
Inventory balance $300,000
Expenses (excluding COGS) $1,120,000
Shares outstanding 290,000
Average issue price of shares $5.00
Gross margin % 40%
Interest rate 8%
TIE ratio 8
Inventory turnover 12 x
Current ratio 1.5
Quick ratio .75
Fixed asset turnover 1.5
Complete the following abbreviated financial statements, and calculate per share ratios indicated. (Hint: Start by subtracting the formula for the quick ratio from that for the current ratio and equating that to the numerical difference.)
Set up an income statement that includes revenue, COGS, GM, EBIT, EBT, and EAT. Set up a balance sheet that includes Current assets, Fixed assets, Total assets, current liabilities, long-term debt, Equity (paid in capital*, and retained earnings), total equity, and total liabilities & equity.
*Paid-in capital = Common Stock + Paid-in Excess
To set up the income statement, we'll need to calculate the Cost of Goods Sold (COGS), Gross Margin (GM), Earnings Before Interest and Taxes (EBIT), Earnings Before Taxes (EBT), and Earnings After Taxes (EAT).
Income Statement:
Revenue: To calculate the revenue, we need to divide the stock price by the number of shares outstanding.
Revenue = Stock price * Shares outstanding
Revenue = $18.37 * 290,000
Revenue = $5,331,300
COGS: To calculate COGS, we need to multiply the inventory balance by the Gross Margin percentage.
COGS = Inventory balance * (1 - Gross margin %)
COGS = $300,000 * (1 - 0.40)
COGS = $180,000
GM (Gross Margin): This has already been provided as 40%.
GM = 40%
EBIT (Earnings Before Interest and Taxes): EBIT is calculated by subtracting the expenses (excluding COGS) from the gross margin.
EBIT = Revenue - COGS - Expenses (excluding COGS)
EBIT = $5,331,300 - $180,000 - $1,120,000
EBIT = $4,031,300
EBT (Earnings Before Taxes): EBT is calculated by subtracting the interest expense from EBIT.
EBT = EBIT - (EBIT * Interest rate)
EBT = $4,031,300 - ($4,031,300 * 0.08)
EBT = $3,703,516
EAT (Earnings After Taxes): EAT is calculated by subtracting the taxes from EBT.
EAT = EBT - (EBT * Tax rate)
Given that the tax rate is not provided, we would need more information to calculate EAT.
To set up the balance sheet, we'll need to calculate Current assets, Fixed assets, Total assets, Current liabilities, Long-term debt, Equity (Paid-in capital and retained earnings), Total equity, and Total liabilities & equity.
Balance Sheet:
Current assets: This includes the inventory balance.
Current assets = $300,000
Fixed assets: This is not provided in the data. We would need more information to calculate fixed assets.
Total assets: Total assets are the sum of current assets and fixed assets.
Total assets = Current assets + Fixed assets
Current liabilities: This is not provided in the data. We would need more information to calculate current liabilities.
Long-term debt: This is not provided in the data. We would need more information to calculate long-term debt.
Equity: Equity is the sum of paid-in capital and retained earnings.
Paid-in capital: Paid-in capital is the sum of common stock and paid-in excess.
Given that the amounts for common stock and paid-in excess are not provided, we cannot calculate paid-in capital.
Retained earnings: Retained earnings is not provided in the data. We would need more information to calculate retained earnings.
Total equity: Total equity is the sum of paid-in capital and retained earnings.
Total equity = Paid-in capital + Retained earnings
Total liabilities & equity: Total liabilities & equity is the sum of current liabilities, long-term debt, and total equity.
Total liabilities & equity = Current liabilities + Long-term debt + Total equity
Note: Without additional information, it is not possible to calculate certain values and ratios, such as per share ratios or the quick ratio mentioned in the question.
To set up the income statement, we need to calculate the revenue, cost of goods sold (COGS), gross margin (GM), earnings before interest and taxes (EBIT), earnings before taxes (EBT), and earnings after taxes (EAT).
1. Revenue:
Revenue can be calculated by multiplying the number of shares outstanding by the average issue price of shares:
Revenue = Shares Outstanding * Average Issue Price
Revenue = 290,000 shares * $5.00
Revenue = $1,450,000
2. Cost of Goods Sold (COGS):
COGS can be determined using the gross margin percentage and the revenue:
COGS = Revenue * (1 - Gross Margin %)
COGS = $1,450,000 * (1 - 40%)
COGS = $870,000
3. Gross Margin (GM):
Gross Margin can be calculated by subtracting COGS from Revenue:
GM = Revenue - COGS
GM = $1,450,000 - $870,000
GM = $580,000
4. Earnings Before Interest and Taxes (EBIT):
EBIT is calculated by subtracting expenses (excluding COGS) from GM:
EBIT = GM - Expenses (excluding COGS)
EBIT = $580,000 - $1,120,000
EBIT = -$540,000 (negative indicates a loss)
5. Earnings Before Taxes (EBT):
Since there is no mention of interest expense, EBIT and EBT will be the same:
EBT = EBIT
EBT = -$540,000
6. Earnings After Taxes (EAT):
EAT can be calculated by multiplying EBT by (1 - Tax Rate). However, the tax rate is not given in the provided data. Therefore, we cannot determine EAT without this information.
Now, let's set up the balance sheet:
1. Current Assets:
Current Assets include inventory and can be found in the provided data:
Current Assets = Inventory Balance
Current Assets = $300,000.
2. Fixed Assets:
Fixed Assets are not directly provided in the data. However, we are given the fixed asset turnover ratio, which can be used to estimate the fixed assets.
Fixed Assets = COGS / Fixed Asset Turnover Ratio
Fixed Assets = $870,000 / 1.5
Fixed Assets = $580,000
3. Total Assets:
Total Assets can be calculated by adding Current Assets and Fixed Assets:
Total Assets = Current Assets + Fixed Assets
Total Assets = $300,000 + $580,000
Total Assets = $880,000
4. Current Liabilities:
The current ratio is given, which can be used to estimate current liabilities.
Current Liabilities = Current Assets / Current Ratio
Current Liabilities = $300,000 / 1.5
Current Liabilities = $200,000
5. Long-Term Debt:
There is no information given about long-term debt in the provided data.
6. Equity:
Equity includes paid-in capital (common stock + paid-in excess) and retained earnings. However, we do not have the individual values for common stock and paid-in excess, so we cannot calculate equity without this information.
Now, let's move on to calculating the per share ratios:
1. Earnings per Share (EPS):
EPS can be calculated by dividing EAT by the number of shares outstanding:
EPS = EAT / Shares Outstanding
EPS = (-$540,000) / 290,000 shares
2. Book Value per Share (BVPS):
BVPS can be calculated by dividing total equity by the number of shares outstanding:
BVPS = Total Equity / Shares Outstanding
Please note that since we cannot calculate EAT, equity, and the missing per share ratios without additional information, the financial statements and per share ratios are incomplete.