Unit 3

Toby B Martinez

Unit 3 Challenge Problem:

The balance sheet and income statement shown below are for Kryloc Inc. You will find that the firm has no amortization charges. It also does not lease any assets and none of its debt must be retired during the next 5 years. The notes payable will be rolled over.

|Balance Sheet (Millions of $) | |

|Assets 2010 | |

|Cash and securities |$ 2,500 |

|Accounts receivable |11,500 |

|Inventories |16,000 |

|Total current assets |$30,000 |

|Net plant and equipment |$20,000 |

|Net plant and equipment $20,000 Total assets |$50,000 |

|Liabilities and Equity | |

|Accounts payable |$9,500 |

|Notes payable |7,000 |

|Accruals |5,500 |

|Total current liabilities |$22,000 |

|Long-term bonds |$15,000 |

|Total debt |$37,000 |

|Common stock |$2,000 |

|Retained earnings |11,000 |

|Total common equity |$13,000 |

|Total liabilities and equity |$50,000 |

|Income Statement (Millions of $) |2010 |

|Net sales |$87,500 |

|Operating costs except depreciation |81,813 |

|Depreciation |1,531 |

|Earnings bef interest and taxes (EBIT) |$4,156 |

|Less interest...