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Abc Sporting Goods Case Summary

Satisfactory Essays

ABC Sporting Goods
Part 1- Complete the following ratio analysis for ABC sporting Goods Profit & Loss
Profit for 2006 was-86,318,
Profit for 2007 was-113,799
Profit for 2008 was-126,472
Profit for 2009 was-75,252
Profit for 2010 was-67,955
Between 2008-2009 ABC Loss 51,220
Between 2009-2010 ABC Loss 7,297
Return on sales was 7.52%
Return on Assets was 27.34%
Return on Net Worth was 83.69%
Quick Ratio was 0.48
Current Ratio was 1.59
Inventory turnover (gross sales divided by inventory) was 5.93
Assets to sales Ratio was 0.28
Total liabilities to net worth was 2.06
Part II Estimate the business value using BizStats. –Valuation Rule for Sporting Goods Store at BizStats.
These are the BizStats I found Profitable Sole …show more content…

Use the following formula:

Purchase price $100,000, down payment 20% or $20,000 which results in $80,000 being financed.

For $1,000 financed at 5%, the factor to calculate your monthly payment is .659955739. Therefore, for $80,000 your payment is $528 per month or $6,336 per year. (Rounded)

We now can calculate the free cash flow available to pay the loan amount. We can use the following formula:

Net Profit
+interest paid (use previous years amount from P&L)
+Depreciation and amortization
= Cash flow

For example, if we have $10,000 for our cash flow and our payments are $528 x 12 months = $6,336; then to calculate our DSC or debt service coverage ratio, we divide the Cash flow by the annual debt service or $10,000 / $6,336 =1.58x. If we borrowed $400,000 our monthly payment is $2,640 or $31,680 and if our cash flow is

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