Company Overview East Coast Yachts was founded in 1969 by Tom Warren as a sole proprietorship which later became a publicly traded corporation after operations were assumed by his daughter (Ross‚ 2011). Located in South Carolina‚ the company manufactured custom midsize‚ high-performance yachts and has been praised for safety and reliability (Ross‚ 2011). The company enjoyed new business and growth within its industry due to its customer satisfaction. However‚ an evaluation of cash flows later
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East Coast Yachts Statement of Cash Flows Cash flows from operating activities | | Net income | $38‚652‚000.00 | Adjustments: | | Depreciation | $16‚800‚000.00 | Increase in accounts receivables | $-910‚000.00 | Increase in inventories | $-4‚494‚000.00 | Increase in other current assets | $-646‚000.00 | Increase in accounts payable | $128‚800.00 | Decrease in accrued expenses | $-1‚400‚000.00 | Decrease in notes payable | $-3‚600‚000.00 | Cash flows provided by operating activities
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Ratios and Financial Planning at East Coast Yachts | Yacht Industry Ratios | | | Lower Quartile | Median | Upper Quartile | Current ratio | 0.50 | 1.43 | 1.89 | Quick ratio | 0.21 | 0.38 | 0.62 | Total asset turnover | 0.68 | 0.85 | 1.38 | Inventory turnover | 4.89 | 6.15 | 10.89 | Receivables turnover | 6.27 | 9.82 | 14.11 | Debt ratio | 0.44 | 0.52 | 0.61 | Debt-equity ratio | 0.79 | 1.08 | 1.56 | Equity multiplier | 1.79 | 2.08 | 2.56 | Interest coverage
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1. Calculate all of the ratios listed in the industry table for East Coast Yachts Current ratio=CA/CL= 14‚651‚000/19‚539‚000=0.75 Quick Ratio=(CA-Inventory)/CL=(14651000-6136000)/19539000=0.44 Total assert turnover=Sales / Total Assets=167310000/108615000=1.54 Inventory turnover=Cost of Goods Sold / Inventory=117910000/6136000=19.22 Receivable turnover=Sales / Accounts Receivable=167310000/5473000=30.57 Debt ratio(TA-TE)/TA=(108615000-55341000)/108615000=0.49 Debt-equity ratio=TD/TE=33735000/55341000=0
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1-Compute all industry ratios presented for East Coast Yachts and COMPARE and comment on each ratio as compared to the Industry Median. (60pts) Industry ratios presented for East Coast Yachts Current ratio = $11‚270‚000 / $15‚030‚000 Current ratio = 0.75 times Quick ratio = ($11‚270‚000 – 4‚720‚000) / $15‚030‚000 Quick ratio = 0.44 times Total asset turnover = $128‚700‚000 / $83‚550‚000 Total asset turnover = 1.54 times Inventory turnover = $90‚700‚000 / $4‚720‚000 Inventory turnover = 19.22
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1. ( Q1 ‚ page 12 ) What are the three types of financial management decision? For each type of decision‚ give an example of a business transaction that would be relevant. What long-term investments to make? Capital Budgeting: Evaluating the size‚ time and risk of future cash flows as well as the process of planning and managing a firm’s long-term investments. The goal is to achieve a hugher value of cash flow generated by assets than the cost of it. The example would be a new restaurant
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Case Study: A Job at East Coast Yachts As a recent college graduate and a new employee of East Coast Yachts‚ it could be a challenging a confusing decision to select an investment option for a 401 (k) plan. There are a number of reasons why it may be more beneficial to invest in mutual funds instead of individual company stocks‚ but the most common are that mutual funds offer diversification‚ convenience and lower costs. The convenience of mutual funds is undeniable and is surely one of the main
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ASSIGNMENT FOR MANAGERIAL ACCOUNTING AND FINANCE RATIOS AND FINANCIAL PLANNING AT EAST COAST YACTHS 1. Calculated all of the ratios listed in the industry table for East Coast Yachts. Current Ratio = Current Asset / Current Liabilities = $14‚651‚000.00 / $ 19‚539‚000 = 0.749 @ 0.75 ( Lower Quartile) Quick Ratio = (Current Asset – Inventory) / Current Liability = ($14‚651‚000 - $6‚136‚000) / $19‚539‚000 = $8‚515‚000 / $19‚539‚000
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Question 1: Financial ratios for East Coast Yachts: Current ratio | = | Current Assets | | | Debt-equity ratio | = | Total liabilities | | | Current Liabilities | | | | | Total equity | | = | $14‚651‚000 | | | | = | $19‚539‚000 + $33‚735‚000 | | | $19‚539‚000 | | | | | $55‚341‚000 | | = | 0.75 | | | | = | 0.96 | | | | | | | | | | | | | | | | | Quick ratio | = | Current Assets - Inventory | | | Equity multiplier | = | Total assets | |
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Analyze company cash flows East Coast Yachts has a strong operating cash flow highlighted by strong earnings before interest and taxes of $88‚416‚000. With the addition of $20‚160‚000 in depreciation and subtraction of $30‚921‚000 in taxes‚ they managed an operating cash flow of $77‚654‚400. East Coast Yachts appears to be in or approaching a growth mode with their capital spending on fixed assets increasing by $60‚000‚000 during the fiscal year. However‚ they made the wise move of reducing
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