file attached
Test 1. Using the abbreviated income statement below for Wiley’s Outdoor Gear Corp. do the following: A. The earnings per share EPS 2019: $5.99 EPS 2018: $2.90 B. The degree of operating leverage (DOL) DOL = 1.16 times If sales are increased by 10%, operating income will increase by 11.6 times. C. The degree of financial leverage (DFL) DFL = 1.10 times, Since, DFL includes EPS, which is more volatile, the lesser the DFL, the lesser is the sensivity. D. The degree of combined leverage (DCL) DCL = 1.28 times If the company increases 5% of the sales, there increases 6.4% of EPS ( 5*1.18) E. Discuss the results of your computations and what you think they say about Wiley’s Corporation Wiley’s Outdoor Gear Corp. Abbreviated Income Statement 12/31/19 12/31/18 Total Sales Revenue $2,386,444 $1,300,933 Cost of Goods Sold 488,091 328,119 Gross Profit $1,898,353 $ 972,814 Operating Expenses 71,855 46,623 Operating Income $1,826,498 $ 926,191 Interest and Taxes 628,422 347,165 Net Income $1,198,076 $ 579,026 Common Shares of stock: 200,000 shares outstanding 2. Using the Balance Sheet for Wanderlust Travel Excursions and Memories business shown below, do the following. A. Create a Pro Forma Balance Sheet for the following year using the percentage of sales method. B. If next year’s sales forecast increases to $425,000, profit margin is 12%, and the owner payout ratio is 85%, what is required in new financing? Wanderlust Travel Excursion and Memories Pro Forma Balance Sheet Total Sales Current Year $275,000 Percentage of Sales (%) Forecast Sales Next Year $350,000 Assets Current Assets Cash $ 5,694 Accounts Receivable 19,662 Inventory 3,381 Total Current Assets $28,737 Fixed Assets Furniture and Fixtures $ 5,595 Transportation Equipment 25,456 Total Fixed Assets $31,051 Total Assets $59,788 Liabilities and Owners’ Equity Current Liabilities Notes Payable $ 15,456 Accrued Taxes Payable 3,598 Total Current Liabilities $ 19,054 Long Term Debt 18,654 Total Liabilities $ 37,708 Owner’s Equity 22,080 Total Liabilities and Owner’s Equity $ 59,788 3. The table below provides a list of sales figures for the previous year (2019) for your mountain resort, which experiences consistent visitation throughout the year. You want to project a forecast for January of the following year (2020). You want to select from 3 models to make your forecast: 1) a 3-month moving average; 2) a weighted moving average (you believe your weights should be 0.2, 0.3, & 0.5); and 3) an exponential smoothing model in which will use an = 0.2. Your forecast for January 2019 was $32,000. A. Construct a table that shows each of these forecasts for the current year and provide the forecast for January of this coming year. B. Using the data given, and your forecasts, which model do you think is the best model for your business? Why? Month Previous Year Sales in $ January 2019 $32,645 February 2019 $31,456 March 2019 $30,270 April 2019 $33,129 May 2019 $34,456 June 2019 $35,256 July 2019 $36,218 August 2019 $35,456 September 2019 $34,250 October 2019 $32,156 November 2019 $30,125 December 2019 $32,275