Determine whether logos liquidity is adequate

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Reference no: EM13939227

USING COMMON SIZE STATEMENTS

Logo, Inc., owns and operates a small chain of sportswear stores located near colleges and universities. Logo has experienced significant growth in recent years. The following data are available for Logo:

Logo, Inc.

Comparative Statements of Income

Year Ended December 31,

(In thousands) 2009 2008 2007

Sales $51,638 $41,310 $34,425

Cost of goods sold 31,050 24,840 20,700

Gross margin $20,588 $16,470 $13,725 Other income, net 383 426 405

$20,971 $16,896 $14,130

Costs and expenses:

Selling and administrative $16,570 $13,465 350 Interest 1,237 765 554

Total costs and expenses $17,807 $14,230 $11,904

Income before income taxes $ 3,164 $ 2,666 $ 2,226 Provision for income taxes 885 746 623 Net income $ 2,279 $ 1,920 $ 1,603

Logo, Inc.

Comparative Balance Sheets (In thousands)

December 31,

ASSETS 2009 2008 2007

Current assets:

Cash $ 360 $ 293 $ 236

Accounts receivable 4,658 3,690 3,285

Inventories 6,064 4,478 3,442

Total current assets $11,082 $ 8,461 $ 6,963 Property, plant, and equipment (net) 4,860 3,600 2,756

Other assets 574 585 562

Total assets $16,516 $12,646 $10,281

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term notes payable Accounts payable

Total current liabilities Long-term debt

Total liabilities Paid-in capital Retained earnings

Total stockholders' equity Total liabilities and stockholders' equity

$ 4,230

1,147

$ 5,377

3,150

$ 8,527

$ 4,725

3,264

$ 7,989

$16,516

$ 1,620

1,013

$ 2,633

3,150

$ 5,783

$ 4,725

2,138

$ 6,863

$12,646

$ 450

720

$ 1,170

3,150

$ 4,320

$ 4,725

1,236

$ 5,961

$10,281

Required:

1. Determine how much Logo's sales, net income, and assets have grown during these three years.

2. Explain how Logo has financed the increase in assets.

3. Determine whether Logo's liquidity is adequate.

4. Explain why interest expense is growing.

5. If Logo's sales grow by 25 percent in 2010, what would you expect net income to be?

6. If Logo's assets must grow by 25 percent to support the 25 percent sales increase and if 50 percent of net income is paid in dividends, how much capital must Logo raise?

Reference no: EM13939227

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