Find below the financial data for Costa. Note that the firm has no amortization charges, it pays $100 in lease, and has $0 debt retired during the next 5 years (notes payable will be rolled over). Assume a 365-day year.
COSTA. BALANCE SHEET (millions of dollars) Cash $ 140.0
Accounts payable $ 800.0 Accts. receivable 880.0
Notes payable 600.0
Inventories 1,320.0 Accruals 400.0
Total current assets $2,340.0
Total current liabilities $1,800.0
Long-term bonds 1,000.0 Total debt $2,800.0
Common stock 200.0
Retained earnings 1,000.0
Net plant & equip. 1,660.0
Total common equity $1,200.0
Total assets $4,000.0
Total liabilities & equity $4,000.0
OTHER DATA Sales = $ 6,000.0
Depreciation expense = $ 100.2
Operating income = $ 300.0
Interest expense = $ 96.0 Net income = $ 122.4
a. Calculate the ratios that you think would be useful in this analysis.
b. Analyze the firm’s:
I. Liquidity position.
II. Debt Management.
c. Calculate the firm’s ROE using Du-pont equation.
