the pdf is attached with the case that needs ais a financial analysis and business valuation
Pace e Bene Unlimited Consolidated Statements of Income For the Years Ended December 31 ( in millions) 2020 2019 Net sales 8,551$ $8,419 Cost of Sales 4,544 4,485 Gross Margin 4,007 3,934 Selling, General and Administrative Expenses 1,493 1,508 Depreciation expense 25 28 Goodwill amortization 70 567 Restructuring charge - 56 Operating income 2,419 1,775 Interest and debt expense 232 251 Interest income (12) (19) Other expense, net 7 9 Income from continuing operations before income tax 2,192 1,534 Provision for income taxes 863 572 Income from continuing operations, net of tax 1,329 962 Losses from discontinued operations, net of tax (216) - Net Income 1,113$ 962$ Pace e Bene Unlimited Consolidated Balance Sheet For the Years Ended December 31 ( in millions) Cash and cash equivalents 2,195 2,723 Accounts receivable, net 210 256 Inventories 1,055 1,219 Other current assets 1,342 1,297 Total Current Assets 4,802 5,495 Property, Plant and Equipment, net 1,002 1,025 Trademarks and Other Intangibles 2,675 2,718 Goodwill and other 8,599 8,771 Total Property, Plant and Equipment 12,276 12,514 Total Assets 17,078$ 18,009$ Current Liabilities: Accounts payable 179$ 196$ Product liability claims 2,589 2,611 Taxes payable 457 360 Other current liabilities 1,147 1,173 Total current liabilities 4,372 4,340 Long-term liabilities Long-term debt 3,701 4,136 Other long-term debt 2,495 3,035 Total long-term liabilities 6,196 7,171 Equity 6,510 6,498 Total liabilities and shareholders' equity 17,078$ 18,009$ Earnings per share Income from continuing operations 2.28$ 1.65$ Losses from discontinued operations (0.37) - Net Income 1.91$ 1.65$ 2020 2019 Year-end stock price $35.48 $33.48 INDUSTRY Number of outstanding shares, 12/31 583,043,872 582,848,102 AVERAGE Sales multiplier 1.2 Free cash flow multiplier 8.5 Earnings multiplier 13 Accounts receivable turnover 30 Inventory turnover 5 Current ratio 0.85 Quick ratio 0.47 Cash flow ratio 0.33 Free cash flow ratio 0.15 Gross Margin % 52% Return on assets ( net book value) 6.70% Return on equity 18.10% Earnings per share 2.33$ 1. Evaluate Pace e Bene Unlimited(PeB) using financial ratio analysis. Because the calculation of some ratios requires the averaging of balance, assume that the balances in 2018 are the same as those in 2019. Compute the ratios for 2019 and 2020 and compare the trend to industry ratios. What makes PeB better/worse than industry and what should they do? liquidity - accounts receivable turnover, inventory turnover, current ratio, quick ratio, cash flow ratio, free cash flow ratio profitability - gross margin percentage, return on assets, return on equity 2. Provide the following business valuations Market Value Book Value of Equity Multiples - Earnings - Sales - Free Cash Flow 3. What would be a reasonable valuation for Pace E Bene and WHY? 1) Compute the ratios for liquidity a. Accounts receivable T/o b. Inventory T/o c. Current Ratio d. Quick Ratio e. Cash flow ratio 2) Compute the ratios for profitability a. Gross Margin Percentage b. ROA c. ROE 3) Compute Business Valuations a. Book Value of Equity b. Market Value c. Multiples