84 PART 1 Introduction to Managerial Finance
Note: Industry averages appear at the top of the following page.Creek Enterprises
Balance Sheet
December 31, 2003
Assets Liabilities and Stockholders’ EquityCurrent assets Current liabilities
Cash $ 1,000,000 Accounts payable $ 8,000,000
Marketable securities 3,000,000 Notes payable 8,000,000Accounts receivable 12,000,000 Accruals (^5) (^0) (^0) , (^0) (^0) (^0)
Inventories (^7) , (^5) (^0) (^0) , (^0) (^0) (^0) Total current liabilities $ (^1) (^6) , (^5) (^0) (^0) , (^0) (^0) (^0)
Total current assets $ (^2) (^3) , (^5) (^0) (^0) , (^0) (^0) (^0) Long-term debt (includes financial leases)b $ (^2) (^0) , (^0) (^0) (^0) , (^0) (^0) (^0)
Gross fixed assets (at cost)a Stockholders’ equity
Land and buildings $11,000,000 Preferred stock (25,000 shares,
Machinery and equipment 20,500,000 $4 dividend) $ 2,500,000
Furniture and fixtures (^8) , (^0) (^0) (^0) , (^0) (^0) (^0) Common stock (1 million shares at $5 par) 5,000,000
Gross fixed assets $39,500,000 Paid-in capital in excess of par value 4,000,000
Less: Accumulated depreciation (^1) (^3) , (^0) (^0) (^0) , (^0) (^0) (^0) Retained earnings (^2) , (^0) (^0) (^0) , (^0) (^0) (^0)
Net fixed assets $ (^2) (^6) , (^5) (^0) (^0) , (^0) (^0) (^0) Total stockholders’ equity $ (^1) (^3) , (^5) (^0) (^0) , (^0) (^0) (^0)
Total assets $
5
0
,
0
0
0
,
0
0
0
Total liabilities and stockholders’ equity $
5
0
,
0
0
0
,
0
0
0
aThe firm has a 4-year financial lease requiring annual beginning-of-year payments of $200,000. Three years of the lease have yet to run.
bRequired annual principal payments are $800,000.
Creek Enterprises
Income Statement
for the Year Ended December 31, 2003
Sales revenue $30,000,000
Less: Cost of goods sold (^2) (^1) , (^0) (^0) (^0) , (^0) (^0) (^0)
Gross profits $ 9,000,000
Less: Operating expenses
Selling expense $3,000,000
General and administrative expenses 1,800,000
Lease expense 200,000
Depreciation expense (^1) , (^0) (^0) (^0) , (^0) (^0) (^0)
Total operating expense (^6) , (^0) (^0) (^0) , (^0) (^0) (^0)
Operating profits $ 3,000,000
Less: Interest expense (^1) , (^0) (^0) (^0) , (^0) (^0) (^0)
Net profits before taxes $ 2,000,000
Less: Taxes (rate = 40%) (^8) (^0) (^0) , (^0) (^0) (^0)
Net profits after taxes $ 1,200,000
Less: Preferred stock dividends (^1) (^0) (^0) , (^0) (^0) (^0)
Earnings available for common stockholders $
1
,
1
0
0
,
0
0
0