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:
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Logo, Inc.
Comparative Statements of Income
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Year Ended December 31,
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(In thousands) 2009 2008 2007
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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,
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ASSETS 2009 2008 2007
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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 $10,281
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Short-term notes payable Accounts payable
Total current liabilities Long-term debt
Total liabilities Paid-in capital Retained earnings
Total stockholders' equity Total liabilities and stockholders' equity
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$ 4,230
1,147
$ 5,377
3,150
$ 8,527
$ 4,725
3,264
$ 7,989
$16,516
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$ 1,620
1,013
$ 2,633
3,150
$ 5,783
$ 4,725
2,138
$ 6,863
$12,646
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$ 450
720
$ 1,170
3,150
$ 4,320
$ 4,725
1,236
$ 5,961
$10,281
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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?