Arora Industries December 31 Balance Sheets (in thousands of dollars)
2002 2001
Assets
Cash and cash equivalents $102,850 $89,725
Accounts Receivable $103,365 $85,527
Inventories $38,444 $34,982
Total current assets $244,659 $210,234
Fixed assets $67,165 $42,436
Total assets $311,824 $252,670
Liabilities and equity
Accounts payable $30,761 $23,109
Accruals $30,477 $22,656
Notes payable $16,717 $14,217
Total current liabilities $77,955 $59,982
Long-term debt $76,264 $63,914
Total liabilities $154,219 $123,896
Common stock $100,000 $90,000
Retained Earnings $57,605 $38,774
Total common equity $157,605 $128,774
Total liabilities and equity $311,824 $252,670
Year-end Stock Price $17.25 $14.75
# of shares (in thousands) 10,000 9,000
Lease payment $75,000 $75,000
Tax rate 40% 40%
a. The company’s sales for 2002 were $455,150,000, and total expenses were $386,878. Furthermore, depreciation amounted to 11 percent of net fixed assets, interest charges were $8,575,000, the province-plus-federal corporate tax rate was 40 percent, and Arora pays 40 percent of its net income out in dividends. Given this information, construct Arora’s 2002 income statement.
b. Next, construct the firm’s statement of retained earnings for the year ending December 31, 2002, and then its 2002 statement of cash flows.
c. Calculate free cash flow for 2002
d. Calculate the following ratios
Ratio Analysis 2002 2001
Liquidity Ratios
Current Ratio
Asset Management Ratios
Inventory Turnover
Days Sales Outstanding
Fixed Assets Turnover
Total Assets Turnover
Debt Management Ratios
Debt Ratio
Times-interest-earned ratio
EBITDA coverage ratio
Profitability Ratios
Profit Margin
Basic Earning Power
Return on Assets
Return on Equity
Market Value Ratios
Earnings per share
Price-to-earnings ratio
Cash flow per share
Price-to-cash flow ratio
Book Value per share
Market-to-book ratio
e. Based on the above ratios, please answer the following questions
i) Has Arora's liquidity position improved or worsened? Explain.
ii) Has Arora's ability to manage assets improved or worsened? Explain.
iii) How has Arora's profitability changed over the last year?
iv) Perform an extended Du Pont analysis for Arora for 2001 and 2002.