The Sleep Company had the following operating results for 2021-2022. In addition, the company paid dividends in both 2021 and 2022 of $60,000 per year and made capital expenditures in both years of $30,000 per year. The company's stock price in 2021 was $8 and $7 in 2022. The industry average earnings multiple for the mattress industry was 9 in 2022 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2022. Balance Sheet, December 31, 2022 2021 Cash $ 340,000 $ 100,000 Accounts Receivable $ 350,000 $ 400,000 Inventory $ 250,000 $ 300,000 Total Current Assets $ 940,000 $ 800,000 Long-lived Assets 1,080,000 1,100,000 Total Assets $ 2,020,000 $ 1,900,000 Current Liabilities $ 200,000 $ 300,000 Long-term Debt 600,000 500,000 Shareholder Equity 1,220,000 1,100,000 Total Debt and Equity $ 2,020,000 $ 1,900,000 Income Statement, for year ended December 31, 2022 2021 Sales $ 4,750,000 $ 4,500,000 Cost of Sales 4,100,000 4,000,000 Gross Margin 650,000 500,000 Operating Expenses 350,000 400,000 Operating Income 300,000 100,000 Taxes 120,000 40,000 Net Income $ 180,000 $ 60,000 Cash Flow From Operations 2022 2021 Net Income $ 180,000 $ 60,000 Plus Depreciation Expense 50,000 50,000 + Decrease (-increase) in Accounts Receivable and Inventory 100,000 0 + Increase (-decrease) in Current Liabilities (100,000) 0 Cash Flow from Operations $ 230,000 $ 110,000 The gross margin percentage for 2022 is (rounded): Multiple Choice 11.2% 12.7% 13.7% 14.9% 13.5%
The Sleep Company had the following operating results for 2021-2022. In addition, the company paid dividends in both 2021 and 2022 of $60,000 per year and made capital expenditures in both years of $30,000 per year. The company's stock price in 2021 was $8 and $7 in 2022. The industry average earnings multiple for the mattress industry was 9 in 2022 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2022. Balance Sheet, December 31, 2022 2021 Cash $ 340,000 $ 100,000 Accounts Receivable $ 350,000 $ 400,000 Inventory $ 250,000 $ 300,000 Total Current Assets $ 940,000 $ 800,000 Long-lived Assets 1,080,000 1,100,000 Total Assets $ 2,020,000 $ 1,900,000 Current Liabilities $ 200,000 $ 300,000 Long-term Debt 600,000 500,000 Shareholder Equity 1,220,000 1,100,000 Total Debt and Equity $ 2,020,000 $ 1,900,000 Income Statement, for year ended December 31, 2022 2021 Sales $ 4,750,000 $ 4,500,000 Cost of Sales 4,100,000 4,000,000 Gross Margin 650,000 500,000 Operating Expenses 350,000 400,000 Operating Income 300,000 100,000 Taxes 120,000 40,000 Net Income $ 180,000 $ 60,000 Cash Flow From Operations 2022 2021 Net Income $ 180,000 $ 60,000 Plus Depreciation Expense 50,000 50,000 + Decrease (-increase) in Accounts Receivable and Inventory 100,000 0 + Increase (-decrease) in Current Liabilities (100,000) 0 Cash Flow from Operations $ 230,000 $ 110,000 The gross margin percentage for 2022 is (rounded): Multiple Choice 11.2% 12.7% 13.7% 14.9% 13.5%
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
Problem 7P
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The Sleep Company had the following operating results for 2021-2022. In addition, the company paid dividends in both 2021 and 2022 of $60,000 per year and made capital expenditures in both years of $30,000 per year. The company's stock price in 2021 was $8 and $7 in 2022. The industry average earnings multiple for the mattress industry was 9 in 2022 and the
| Balance Sheet, December 31, | ||
| 2022 | 2021 | |
|---|---|---|
| Cash | $ 340,000 | $ 100,000 |
| Accounts Receivable | $ 350,000 | $ 400,000 |
| Inventory | $ 250,000 | $ 300,000 |
| Total Current Assets | $ 940,000 | $ 800,000 |
| Long-lived Assets | 1,080,000 | 1,100,000 |
| Total Assets | $ 2,020,000 | $ 1,900,000 |
| Current Liabilities | $ 200,000 | $ 300,000 |
| Long-term Debt | 600,000 | 500,000 |
| Shareholder Equity | 1,220,000 | 1,100,000 |
| Total Debt and Equity | $ 2,020,000 | $ 1,900,000 |
| Income Statement, for year ended December 31, | ||
| 2022 | 2021 | |
|---|---|---|
| Sales | $ 4,750,000 | $ 4,500,000 |
| Cost of Sales | 4,100,000 | 4,000,000 |
| Gross Margin | 650,000 | 500,000 |
| Operating Expenses | 350,000 | 400,000 |
| Operating Income | 300,000 | 100,000 |
| Taxes | 120,000 | 40,000 |
| Net Income | $ 180,000 | $ 60,000 |
| Cash Flow From Operations | 2022 | 2021 |
|---|---|---|
| Net Income | $ 180,000 | $ 60,000 |
| Plus Depreciation Expense | 50,000 | 50,000 |
| + Decrease (-increase) in Accounts Receivable and Inventory | 100,000 | 0 |
| + Increase (-decrease) in Current Liabilities | (100,000) | 0 |
| Cash Flow from Operations | $ 230,000 | $ 110,000 |
The gross margin percentage for 2022 is (rounded):
Multiple Choice
-
11.2%
-
12.7%
-
13.7%
-
14.9%
-
13.5%
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