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Question;Chris Guthrie was recently hired by Kiwi Yachts Ltd to help;the company with itsFINANCIAL planning and to evaluate the company?s performance.;Chris graduated from university five years ago with a finance degree. He has;been employed in the finance department of an S&P/ASX 200 company since;then.;Kiwi Yachts was founded 10 years ago by friends Mark Kwan;and Todd Jovanovich. The company has manufactured and sold large- to;medium-sized yachts over this period, and the company?s products have received;high reviews for safety, performance and reliability. The company has a;nicheMARKET in that it sells primarily to individuals who own, sail and race;their own yachts. The company has two base models: the Swordfish, which sells;for $53?000, and the Shark, which sells for $78?000. While the company;manufactures yachts, its operations are different from those of many commercial;boating companies. Kiwi Yachts builds yachts to order. By using prefabricated;parts, the company is able to complete the manufacture of a yacht in only five;weeks. The company also receives a deposit on each order, as well as another;partial payment before the order is complete. In contrast, other commercial;yacht builders may take 18 months to two years to manufacture once the order is;placed.;Mark and Todd have provided the followingFINANCIAL;statements. Chris has gathered the industry ratios for the boating;manufacturing industry;Kiwi Yachts Ltd;2014 Income Statement;Sales;$24?092?400;Cost of goods sold;17?982?000;Other expenses;2?878?800;Depreciation;786?000;EBIT;$?2?445?600;Interest;434?400;Taxable income;$?2?011?200;Taxes;?? 804?480;Net income;$?1?206?720;Dividends;$246?000;Additions to retained earnings;960?720;Kiwi Yachts Ltd;2014 Balance Sheet;Assets;Liabilities and Equity;Current assets;Current liabilities;Cash;$ 438?048;Accounts payable;$? 858?816;Accounts receivable;1?841?616;Notes payable;1?735?680;Inventory;1?486?200;?Total current liabilities;$ 2?594?496;Total current assets;$ 3?765?864;Fixed assets;Long-term debt;$ 4?590?000;Net plant and equipment;$14?778?816;Shareholder equity;Ordinary shares;180?000;Retained earnings;11?180?184;?;?Total equity;$11?360?184;?Total assets;$18?544?680;Total liabilities and equity;$18?544?680;Boating Manufacturing Industry Ratios;Lower Quartile;Median;Upper Quartile;Current ratio;0.5;1.43;1.89;Quick ratio;0.21;0.38;0.62;Cash ratio;0.08;0.21;0.39;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;Total 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;Times interest earned;5.18;8.06;9.83;Cash coverage ratio;5.84;8.43;10.27;Profit margin;4.05%;6.98%;9.87%;Return on assets;6.05%;10.53%;13.21%;Return on equity;9.93%;16.54%;26.15%;Based on the above information, answer the following;questions;?a) Calculate the following ratios for Kiwi Yachts: current;ratio, quick ratio, cash ratio, total asset turnover, inventory turnover;receivables turnover, total debt ratio, debt?equity ratio, equity multiplier;times interest earned, cash coverage ratio, profit margin, return on assets and;return on equity.;?b) Compare the performance of Kiwi Yachts to the industry.;For each ratio, comment on why it might be viewed as positive or negative;relative to the industry.


Paper#48945 | Written in 18-Jul-2015

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