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NikoTech's Financial Statements
The income statement, balance sheet and cash flow statement in Tables 11.1, 11.2 and 11.3, respectively, are a reflection of the most recent two-year (Y1 and Y2) performance of the organization. To aid the analysis, 17 different ratios and calculations that will assist in evaluating NikoTech's financial health are listed in Table 11.4. Table 11.5 provides the Y1 and Y2 results of those ratios. All figures from the balance sheet, income statement and cash flow statement have been consolidated and simplified for ease of calculation. Based on a calendar year, the most recent year's balance sheet figures are interpreted as being indicative of the average figures for the preceding four quarters. To facilitate the study, it is recommended that the reader make a copy of each report, the formulas and the ratio results prior to beginning the analysis.Comparative Income Statement ($ in Millions) | ||||||||
|---|---|---|---|---|---|---|---|---|
Y2 $ | Y2 Margin | Y2 % of Sales | Y1 $ | Y1 Margin | Y1 % of Sales | $ Delta Y1–Y2 | % Delta Y1–Y2 | |
Sales | 1,845 | 1,500 | 345 | 23.0% | ||||
Sales Returns and Allowances | 147 | 8.0% | 60 | 4.0% | 87 | 145.0% | ||
Net Sales | 1,698 | 1,440 | 258 | 17.9% | ||||
Cost of Goods Sold | 1,239 | • | 73.0% | 990 | 68.8% | 249 | 25.2% | |
Gross Profit | 459 | 27.0% | 450 | 31.3% | 9 | 2.0% | ||
Operating Expenses | ||||||||
General, Sales and Administrative | 378 | 360 | 18 | 5.0% | ||||
EBITDA | 81 | 4.8% | 90 | 6.3% | -9 | -10.0% | ||
Nonoperating Income | 3 | 6 | -3 | -50.0% | ||||
Depreciation | 36 | 36 | 0 | 0.0% | ||||
Interest Expense [*] | 27 | 18 | 9 | 50.0% | ||||
Income Before Taxes | 21 | 1.2% | 42 | 2.9% | -21 | -50.0% | ||
Income Taxes (40%) | 8.4 | 16.8 | -8.4 | -50.0% | ||||
Net Income | 12.6 | 0.7% | 25.2 | 1.7% | -12.6 | -50.0% | ||
[*]Y1 interest expense of $18 million based on 3.75% of $480 million total. Y2 interest expense of $27 million based on 5% of $540 million total. | ||||||||
Comparative Balance Sheet (in Millions) | |||
|---|---|---|---|
Y2 | Y1 | $ Delta | |
Assets | |||
Current Assets | |||
Cash | 87 | 264 | -177.0 |
Marketable Securities | 15 | 30 | -15.0 |
Accounts Receivable | 450 | 285 | 165.0 |
Inventory | 660 | 480 | 180.0 |
Total Current Assets | 1,212 | 1,059 | 153.0 |
Fixed Assets | |||
Plant and Equipment | 564 | 540 | 24.0 |
Total Assets | 1,776 | 1,599 | 177.0 |
Liabilities | |||
Current Liabilities | |||
Accounts Payable | 360 | 285 | 75.0 |
Other Current Liabilities | 47.4 | 18 | 29.4 |
Total Current Liabilities | 407.4 | 303 | 104.4 |
Long-Term Debt | 540 | 480 | 60.0 |
Total Liabilities | 947.4 | 783 | 164.4 |
Stockholders' Equity | |||
Common Stock | |||
$10 Par Value, 75,300,000 Shares | 753 | 753 | |
Retained Earnings | 75.6 | 63 | |
Total Stockholders' Equity | 828.6 | 816 | |
Total Liability and Stockholders' Equity | $1,776.0 | $1,599 | |
Y2 (in Millions) | |
|---|---|
Operating Activities | |
Net Income | $12.6 |
Depreciation | $36 |
Increase in Accounts Receivable | ($165) |
Increase in Accounts Payable | $75 |
Increase in Other Payables | $29.4 |
Increase in Inventories | ($180) |
Cash from Operating Activities | ($192) |
Investing Activities | |
Purchase of Fixed Assets | ($60) |
Sale of Marketable Securities | $15 |
Cash from Investing Activities | ($45) |
Financing Activities | |
Issuance of Long-Term Notes | $60 |
Cash from Financing Activities | $60 |
Net Decrease in Cash | ($177) |
Formula | |
|---|---|
Days of Inventory | Average Inventory/(Cost of Goods Sold/365) |
Days of Receivables | Average Receivables/(Net Sales/365) |
Operating Cycle | Days of Inventory + Days Receivable Outstanding |
Days of Payables | Average Payables/(Cost of Goods Sold/365) |
Cash-to-Cash Cycle | (Days of Inventory + Days of Receivables) - Days Payable Outstanding |
Inventory Turnover | Cost of Goods Sold/Average Inventory |
Receivables Turnover | Net Sales/Average Receivables |
Payables Turnover | Cost of Goods Sold/Average Payables |
Working Capital | Current Assets - Current Liabilities |
Current Ratio | Current Assets/Current Liabilities |
Acid Test | Current Assets (Less Inventory) - Current Liabilities |
Inventory to Sales | Inventory/Net Sales |
Receivables to Sales | Receivables/Net Sales |
Working Capital to Sales | Working Capital/Net Sales |
Operating Cash Flow to Net Income | Cash from Operating Activities/Net Income |
Total Asset Turnover | Net Sales/Total Assets |
Return on Investment | Net Income/Total Assets |
$ in Millions | |||
|---|---|---|---|
Y2 | Y1 | Delta | |
Days of Inventory | $660/($1,239/365) = 194 days | $480/($990/365) = 177 days | 17 days |
Days of Receivables | $450/($1,698/365) = 97 days | $285/($1,440/365) = 72 days | 25 days |
Operating Cycle | 194 + 97 = 291 days | 177 + 72 = 249 days | 42 days |
Days of Payables | $360/($1,239/365) = 106 days | $285/($990/365) = 105 days | 1 day |
Cash-to-Cash Cycle | (194 + 97) - 106 = 185 days | (177 + 72) - 105 = 144 days | 41 days |
Inventory Turnover | $1,239/$660 = 1.9 times | $990/$480 = 2.06 times | (0.15) times |
Receivables Turnover | $1,698/$450 = 3.8 times | $1,440/$285 = 5.05 times | (1.25) times |
Payables Turnover | $1,239/$360 = 3.44 times | $990/$285 = 3.47 times | (0.03) times |
Working Capital | $1,212 - $407.4 = $804.6 | $1,059 - $303 = $756 | $48.60 |
Current Ratio | $1,212/$407.4 = 2.97 times | $1,059/$303 = 3.5 times | (0.53) times |
Acid Test | $552/$407.4 = $1.35 | $579/$303 = $1.91 | ($0.56) |
Inventory to Sales | $660/$1,698 = $0.39 | $480/$1,440 = $0.33 | $0.06 |
Receivables to Sales | $450/$1,698 = $0.26 | $285/$1,440 = $0.20 | $0.06 |
Working Capital to Sales | $804.6/$1,698 = $0.47 | $756/$1,440 = $0.52 | ($0.05) |
Operating Cash Flow to Net Income | ($192)/$12.6 = -$15.23 | ||
Total Asset Turnover | $1,698/$1,776 = $0.95 | $1,440/$1,599 = $0.90 | $0.05 |
Return on Investment | $12.6/$1,776 = 0.7% | $25.2/$1,599 = 1.6% | 0.9% |
