Store container corporation

Question

Store container corporation balance sheet (millions of dollars)
December 31,	200X	200Y	200Z
Assets

Cash and equivalent	$8,290	$3,880	$15,400
Receivables	123,860	127,950	243,140
Inventories	152,660	148,350	238,210
Other current	38,440	40,000	33,710
Total current	323,250	320,180	530,460

Net property, plant, and equipment	657,660	642,560	924,360
Other assets	25,750	47,580	68,780
Total assets	$1,006,660	$1,010,320	$1,523,600

Liabilities and stockholders’ equity

Notes payable	$62,200	$57,630	$7,330
Accounts payable	53,000	57,970	105,250
Income taxes payable	3,740	4,120	5,880
Other current	45,440	45,410	84,950
Total current	164,380	165,130	203,410

Long-term debt	491,330	501,250	768,490
Deferred taxes	55,800	49,210	69,900
Total long-term debt	547,130	550,460	838,390
Total liabilities	711,510	715,590	1,041,800

Common stock	147,390	152,170	222,360

Retained earnings	147,760	142,560	163,250
Total common equity	295,150	295,150	385,610

Preferred stock	–	–	96,190

Total liabilities & equity	$1,006,660	$1,010,320	$1,523,600

Store container income statement (millions of dollars) (continued)
Sales	200X	200Y	200Z

Net sales	$1,244,390	$1,229,150	$2,032,320
Other income	7,110	4,600	10,850
Total	1,251,500	1,233,750	2,043,170

Costs and expenses

Cost of sales	925,870	944,150	1,564,610
Selling and administrative expenses	147,640	156,990	241,180
Depreciation and amortization	63,380	67,810	92,310
Interest expense	59,280	63,310	85,340
Total	1,196,170	1,232,260	1,983,440
Income (loss) before taxes	55,330	1,490	59,730
Provision (credit) for income taxes	21,670	(2,290)	(24,320)
Net income	$33,660	$3,780	$35,410

Store container corporation key ratios 200X-200Z
Ratio	200X	200Y	200Z	Industry
Liquidity
CA/CL	1.97×	1.94×	2.61×	1.80×
Cash + receivables/CL	0.80×	0.80×	1.27×	0.90×
Receivables/working capital	78.0%	83.0%	74.0%	69.0%
Inventory/working capital	96.0%	96.0%	73.0%	72.0%

Debt
TL/equity	241.07%	242.80%	270.17%	129.10%
CL/equity	55.69%	56.03%	52.75%	50.90%
EBIT/interest	1.93×	1.02×	1.70×	5.76×

Profitability
Net income/sales	2.71%	0.31%	1.74%	2.50%
Sales/total assets	1.24×	1.22×	1.33×	1.68×
Total assets/equity	3.41×	3.43×	3.95×	3.26×
Net income/equity	11.400%	1.280%	9.180%	13.700%

Causal
Fixed assets/equity	222.82%	218.01%	239.71%	110.00%
Collection period	36.33 days	38.00 days	43.67 days	38.90 days
Sales/inventory	8.15×	8.29×	8.53×	12.30×
Sales/equity	4.22×	4.17×	5.27×	2.63×
Net income/sales	2.71%	0.30%	1.74%	5.20%
Miscellaneous assets/equity	8.72%	16.14%	17.83%	7.95%

Accepted Answer

Liquidity looks sound, except that receivables/working capital is a little high.

Debt is well beyond the industry norms and is rising as measured by total liabilities to equity. Current debt is only slightly above average, but times interest earned is below average.

Profitability is below average.

Causes

Excessive fixed assets without equity financing
Excessive receivables
Excessive inventory
Overtrading
Inadequate cost control low profit margin during sales growth
Excessive miscellaneous assets

Question 6.CS.4: Store container corporation

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