Question

 Question 1INCOME STATEMENT(Figures in $ millions)  Net sales$ 882     Cost of goods sold742     Depreciation32      Earnings before interest and taxes (EBIT)$ 108     Interest expense13      Income before tax$ 95     Taxes33      Net income$ 62     BALANCE SHEET(Figures in $ millions) End of Year Start of Year  Assets           Current assets$370  $314     Long-term assets 260   223         Total assets$630  $537     Liabilities and shareholders’ equity           Current liabilities$195  $158     Long-term debt 109   122     Shareholders’ equity 326   257         Total liabilities and shareholders’ equity$630  $537    The company’s cost of capital is 8.00%. a.Calculate Watervan’s economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)   Economic value added$  million  b.What is the company’s return on capital? (Use start-of-year rather than average capital.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)   Return on capital%   c.What is its return on equity? (Use start-of-year rather than average equity.) (Enter your answer as a percent rounded to 2 decimal places.)   Return on equity%   d.Is the company creating value for its shareholders?   

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Question 2Here are simplified financial statements for Phone Corporation in a recent year:  INCOME STATEMENT
(Figures in $ millions)  Net sales$ 13,100    Cost of goods sold4,010    Other expenses4,042    Depreciation2,488      Earnings before interest and taxes (EBIT)$ 2,560    Interest expense680     Income before tax$ 1,880    Taxes (at 30%)564     Net income$ 1,316    Dividends$ 866     BALANCE SHEET(Figures in $ millions)  End of Year Start of Year   Assets              Cash and marketable securities $88  $157       Receivables  2,332   2,470       Inventories   182   233       Other current assets  862   927              Total current assets $3,464  $3,787       Net property, plant, and equipment  19,963   19,905       Other long-term assets  4,206   3,760              Total assets $27,633  $27,452        Liabilities and shareholders’ equity              Payables $2,554  $3,030       Short-term debt  1,414   1,568       Other current liabilities  806   782              Total current liabilities $4,774  $5,380       Long-term debt and leases  7,267   7,012       Other long-term liabilities  6,168   6,139       Shareholders’ equity  9,424   8,921              Total liabilities and shareholders’ equity $27,633  $27,452        Calculate the following financial ratios for Phone Corporation: (Use 365 days in a year. Do not round intermediate calculations. Round your percentage answers “Return on equity”, “Return on assets”, Return on capital” and “Operating profit margin” to 2 decimal places and the rest to 2 decimal places.)          a.Return on equity (Use average equity.) %b.Return on assets (Use after-tax operating income and average assets.) %c.Return on capital (Use after-tax operating income and average capital.) %d.Days in inventory (Use beginning inventory.) dayse.Inventory turnover (Use beginning inventory.) f.Average collection period (Use beginning receivables.) daysg.Operating profit margin (Use after-tax operating income.) %h.Long-term debt ratio (Use end of year values.) i.Total debt ratio (Use end of year values.) j.Times interest earned k.Cash coverage ratio l.Current ratio (Use end of year values.) m.Quick ratio (Use end of year values.)   Question 3      Long-term debt ratio0.3    Times interest earned10.0    Current ratio1.2    Quick ratio1.0    Cash ratio0.4    Inventory turnover3.0    Average collection period73days   Use the above information from the tables to work out the following missing entries, and then calculate the company’s return on equity. Note: Turnover and the average collection period are calculated using start-of-year, not average, values. (Enter your answers in millions. Round intermediate calculations and final answers to 2 decimal places.) INCOME STATEMENT(Figures in $ millions)  Net sales$     Cost of goods sold     Selling, general, and administrative expenses20.00     Depreciation30.00       Earnings before interest and taxes (EBIT) $    Interest expense       Income before tax $    Tax (35% of income before tax)       Net income$       BALANCE SHEET(Figures in $ millions)  This YearLast Year  Assets            Cash and marketable securities $    $ 30       Accounts receivable    44       Inventories     36                  Total current assets $     $ 110       Net property, plant, and equipment    35                  Total assets $    $145            Liabilities and shareholders’ equity            Accounts payable $35.00    $ 30       Notes payable 40.00    45                  Total current liabilities    75       Long-term debt    26       Shareholders’ equity    44                  Total liabilities and shareholders’ equity $195.00    $145           
Question 4
In 2014 Electric Autos had sales of $110 million and assets at the start of the year of $170 million. If its return on start-of-year assets was 20%, what was its operating profit margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)   Operating profit margin  %  





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