Jackson Manufacturing Has the Following Operating Results for 2019 $\text { Balance Sheet, Dec 31, }$

question 50

Essay

Jackson Manufacturing has the following operating results for 2019. $\text { Balance Sheet, Dec 31, }$
$\begin{array}{lllll} & 2019 & 2018 \\\text { Cash } & \$ 489,350 & \$ 125,000 \\\text { Accounts Receivable } & \$ 315,000 & \$ 400,000 \\\text { Inventory } & \$ 225,000 & \$ 375,000\\\text { Total Current Assets } & \text { \$ } 1,029,350 & \$ 900,000 \\\text { Long-lived Assets } & 2,345,000 & 2,350,000 \\\text { Total Assets }&\$3,374,350&\$3,250,000\\\text { Current Liabilities }&\$285,000&\$315,000\\\text { Long-term Debt } & 600,000 & 800,000 \\\text { Shareholder Equity } & 2,489,350 & 2,135,000 \\\text { Total Debt and Equity }&\$3,374,350&\$3,250,000\end{array}$
$\text { Income Statement, for year ended Dec } 31 \text {, }$
$\begin{array}{lrrr}&2019&2018\\\text { Sales } & \$ 3,775,000 & \$ 3,555,000 \\\text { Cost of Sales } & 2,554,000 & 2,445,000 \\\text { Gross Margin }& 1,221,000 & 1,110,000 \\ \text { Operating Expenses }& 522,000 & 445,000 \\\text { Operating Income } & 699,000 & 665,000 \\\text { Taxes } & 244,650 & 232,750\\\text { Net Income }&\$454,350&\$432,250\\\\\text { Cash Flow From Operations }&2019&2018\\\text { Net Income } & \$ 454,350 & \$ 432,250 \\\text { Plus Depreciation Expense } & 50,000 & 50,000\\+ \text { Decrease (-inc) in AccRec and Inv. }&235,000&-\\\text { +Increase (-dec) in Cur. Liabl. }&(30,000)&-\\\text { Cash Flow from Operations }&\$709,350&\$482,250\end{array}$ In addition, the company paid dividends in both 2018 and 2019 of $100,000 per year and made capital expenditures in both years of $45,000 per year. The company's stock price in 2018 was $10 and $12 in 2019. The industry average earnings multiple for the industry was 10 in 2019 and the free cash flow and sales multiples were 20 and 2, respectively. The company is publicly owned and has 1,050,000 shares of outstanding stock at the end of 2019. The industry average ratios for Jackson's industry were as follows in the most recent year.
Exhibit A: Industry Ratios for Jackson Manufacturing
$\begin{array}{lc}\text { Accounts Receivable Turnover } & 11.10 \\\text { Inventory Turnover } & 11.30 \\\text { Current Ratio } & 2.80 \\\text { Quick Ratio } & 2.00 \\\text { Cash Flow from Operations Ratio } & 1.20 \\\text { Free Cash Flow Ratio } & 1.10 \\\text { Gross Margin Percentage } & 30.0 \% \\\text { Return on Assets (Net Book Value) } & 20.0 \% \\\text { Return on Equity } & 30.0 \%\end{array}$ Required:
1. Calculate the ratios In Exhibit A for Jackson Company for 2019, group them by category (liquidity, profitability) and develop a brief overview for the liquidity and profitability of Jackson Manufacturing at the end of 2019.
2. Complete a Business Valuation for Jackson Manufacturing based on 2019 financial statement information.

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Definitions:

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A measure of the difference between the actual level of activity and the planned level of activity.

Budgeting

The process of creating a plan to spend money over a particular period, a fundamental practice in financial planning and management.

Planning Budget

A budget designed for planning and preparing the financial strategies of an organization, often used to estimate future revenues and expenses.