2-3: For the 10 questions below, see the attached financial statements for “Cline Custom Bikes.”
a. What was the depreciation expense for 2012? (2 points)
b. What are the current ratios for BOTH 2011 and 2012 (2 points)
c. Was the current ratio for 2012 better or worse compared to 2011? (A one word response please) (2 points)
d. What was the inventory turnover ratio for 2012? (2 points)
e. What was the average collection period for accounts receivable? (2 points)
f. What is their marginal tax rate? (2 points)
g. How many shares of common stock did they issue (sell) in 2012? (2 points)
h. What are their earnings per share? (1 points)
i. How much did they pay in preferred stock dividends in 2012? (2 points)
j. What was the “TIE” ratio? (2 points)

2-4: ABC Corp provides you with the following data: sales is $500,000, operating profits is $300,000, interest expense is $25,000, net income is $100,000, common stock (par) is $10,000, paid-in-capital in excess of par is $210,000, and the total number of common shares outstanding is 10,000.
a. Given the above, and assuming no flotation costs, what was the price of a share of common stock when it was sold? (4 points)
b. Assuming no preferred stock, what are the earnings per share? (1 point)

2-5: Using the income statement for Cline Custom Bikes (also used for problem 2-3)
a. Create a Common Sized Income Statement. (3 points)
b. If projected sales revenue for the next year is 2.75 million, create a Pro Forma Income Statement. (3 points)

BONUS Questions: (5 points) Use your data from problem 2-5

As you know, we are in an election cycle. One of the major contenders to be our next president believes that those with the highest incomes should pay higher taxes (corporate or individual doesn’t matter). Suppose that person is elected president and in fact does raise taxes. If the companies projected sales revenue of 2.75 million causes the average corporate income tax rate to increase to 45%, what is the impact on the company’s net profit after taxes.

Knowing the impact to the net profit after taxes (you, as the company’s manager), do you still want to increase sales revenue as projected, do you discourage growth, or seek another alternative? Explain.

Which political party is most likely to stifle business growth by raising taxes? Explain.

2-3: For the 10 questions below, see the attached financial statem...