Exhibit 4 Financial Statement Analysis Project Solution

Financial Performance Spreadsheet

Company Name: Plush Carpet Mill, Inc.
Industry
Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2005 Average
Balance Sheet ($000) $ % of TA $ % of TA $ % of TA % of TA
Assets
Current Assets
Cash & marketable securities 1,512 6.8% 1,176 3.6% 1,097 2.3% 6%
Accounts receivable 6,237 28.1% 10,271 31.2% 15,919 33.4% 20%
Inventories 4,536 20.4% 7,838 23.8% 12,570 26.4% 31%
Prepaid expenses 3,780 17.0% 5,140 15.6% 6,840 14.3% 5%
Total current assets 16,065 72.3% 24,425 74.2% 36,426 76.4% 62%
Gross fixed assets 6,300 28.4% 9,080 27.6% 12,918 27.1% 25%
Less: Accumulated depreciation 2,050 9.2% 2,958 9.0% 4,250 8.9% 9%
Net Fixed assets 4,250 19.1% 6,122 18.6% 8,668 18.2% 28%
Intangible assets 567 2.6% 588 1.8% 605 1.3% 4%
All other noncurrent assets 1,323 6.0% 1,790 5.4% 1,985 4.2% 6%
Total assets 22,205 100.0% 32,925 100.0% 47,684 100.0% 100%

Liabilities and Stockholders' Equity

Current Liabilities
Notes payable 1,205 5.4% 3,243 9.8% 6,323 13.3% 8%
Current maturities--L.T.D. 1,008 4.5% 1,460 4.4% 2,246 4.7% 5%
Accounts payable 3,570 16.1% 5,958 18.1% 9,955 20.9% 16%
Income taxes payable 84 0.4% 336 1.0% 336 0.7% 0%
Accruals and other current liabilities 1,995 9.0% 3,360 10.2% 5,016 10.5% 8%
Total current liabilities 7,862 35.4% 14,357 43.6% 23,876 50.1% 36%
Long-term debt 2,940 13.2% 6,100 18.5% 9,350 19.6% 13%
All other noncurrent liabilities 11%
Total liabilities 10,802 48.6% 20,457 62.1% 33,226 69.7% 61%
Stockholders' equity
Common stock 3,360 15.1% 3,360 10.2% 3,360 7.0%
Paid-in capital 2,100 9.5% 2,100 6.4% 2,100 4.40%
Retained earnings 5,943 26.8% 7,008 21.3% 8,998 18.9%
Total stockholders' equity 11,403 51.4% 12,468 37.9% 14,458 30.3% 39%
Total liabilities & equity 22,205 100.0% 32,925 100.0% 47,684 100.0% 100%

Industry
2003 2004 2005 Average
Income Statement ($000) $ % of Sales $ % of Sales $ % of Sales% of Sales
Sales revenue 50,400 100.0% 65,100 100.0% 81,312 100.0% 100.0%
 Exhibit 4 Financial Statement Analysis Project Solution

Less: Cost of goods sold 35,431 70.3% 45,872 70.5% 57,098 70.2% 71.5%
Gross profit 14,969 29.7% 19,228 29.5% 24,214 29.8% 28.5%
Less: Operating expenses
Gen. & Adm. and Selling 12,331 24.5% 15,099 23.2% 17,296 21.3%
Depreciation expense 630 1.3% 908 1.4% 1,292 1.6%
Total operating expenses 12,961 25.7% 16,007 24.6% 18,588 22.9% 23.0%
Operating income (EBIT) 2,008 4.0% 3,221 4.9% 5,626 6.9% 5.4%
Less: Interest expense 335 0.7% 756 1.2% 1,343 1.7% 1.1%
Earnings before taxes (EBT) 1,673 3.3% 2,465 3.8% 4,283 5.3% 4.4%
Less: Income Taxes (34%) 569 1.1% 838 1.3% 1,456 1.8%
Net income 1,104 2.2% 1,627 2.5% 2,827 3.5%

Common stock dividends (000) 314 562 837

Number shares common stock (000) 1,120 1,120 1,120
Earnings per common share (EPS) 0.99 1.45 2.52
Price per common share 17.25 17.71 18.43

Evaluation
Time- Cross-
Industry series sectional
Financial Ratios 2003 2004 2005 Average 2003-05 2005
Liquidity
Current ratio (times) 2.04 1.70 1.53 1.6 poor ok
Quick or Acid-test ratio (times) 0.99 0.80 0.71 0.8 poor ok
Asset Management
Accounts receivable turnover (times) 8.08 6.34 5.11 9.4 poor poor
Inventory turnover (times) 7.81 5.85 4.54 3.8 poor poor
Fixed asset turnover (times) 11.86 10.63 9.38 6.4 good ok
Total assets turnover 2.27 1.98 1.71 1.8 good ok

Evaluation
Trend Industry
Industry Analysis Analysis
Financial Ratios 2003 2004 2005 Average 2003-05 2005
Solvency
Debt ratio (%) 48.6% 62.1% 69.7% 66.7% poor ok
Times interest earned (times) 5.99 4.26 4.19 3.4 poor ok
Profitability
Operating profit margin (%) 4.0% 4.9% 6.9% 5.4% good good
Net profit margin (%) [before tax] 3.3% 3.8% 5.3% 4.4% good good
 Exhibit 4 Financial Statement Analysis Project Solution

Return on assets (%) [before tax] 7.5% 7.5% 9.0% 8.0% good ok
Return on equity (%) [before tax] 14.7% 19.8% 29.6% 17.1% good good
Market Value
Price-earnings ratio (times) 17.42 12.21 7.31 poor poor
Price-to-book ratio (times) 0.87 0.60 0.43 poor poor

Cash Flow Statement 2004 2005

Cash, beginning of year 1,512 1,176

Operating activities
Net income 1,627 2,827
Plus Depreciation 908 1,292
Change in accounts receivable (4,034) (5,648)
Change in inventory (3,302) (4,732)
Change in prepaid expenses (1,360) (1,700)
Change in accounts payable 2,388 3,997
Change in income taxes payable 252 -
Change in accruals & other cur. Liab. 1,365 1,656
Net cash from operating activities (2,156) (2,308)

Investment activities
Fixed asset acquisitions (2,780) (3,838)
Change in intangible assets (21) (17)
Change in all other noncurrent assets (467) (195)
Net cash from investment activities (3,268) (4,050)

Financing activities
Change in notes payable 2,038 2,038
Change current maturities--L.T.D. 452 452
Change in long-term debt 3,160 3,250
Change in all other noncurrent liab. - -
Change in common stock & paid-in cap. - -
Dividends paid -248 -275
Net cash from financing activities 5,402 5,465

Net change in cash (336) (79)

Cash, end of year 1,176 1,097

Exhibit 4 Financial Statement Analysis Project Solution