Assignment 3: Ratio Analysis (MISS PROFESSOR ONLY!!!)
dferrante80
CHARTSFORM1A3.docx|
Balance Sheet as of December 31, 2010 |
||||
|
Gary and Company |
||||
|
Cash |
$45 |
|
Accounts payables |
$45 |
|
Receivables |
66 |
|
Notes payables |
45 |
|
Inventory |
159 |
|
Other current liabilities |
21 |
|
Marketable securities |
33 |
|
Total current liabilities |
$111 |
|
Total current assets |
$303 |
|
|
|
|
Net fixed assets |
147 |
|
Long Term Liabilities |
|
|
Total Assets |
$450 |
|
Long-term debt |
24 |
|
|
|
Total Liabilities |
$135 |
|
|
|
|
|
|
|
|
|
|
Owners Equity |
|
|
|
|
|
Common stock |
$114 |
|
|
|
|
Retained earnings |
201 |
|
|
|
|
Total stockholders’ equity |
315 |
|
|
|
|
|
Total liabilities and equity |
$450 |
|
Income Statement Year 2010 |
|
|
|
|
|
Net sales |
$795 |
|
Cost of goods sold |
660 |
|
Gross profit |
135 |
|
Selling expenses |
73.5 |
|
Depreciation |
12 |
|
EBIT |
49.5 |
|
Interest expense |
4.5 |
|
EBT |
45 |
|
Taxes (40%) |
18 |
|
Net income |
27 |
1. Calculate the following ratios AND interpret the result against the industry average:
|
Ratio |
Your Answer |
Industry Average |
Your Interpretation (Good-Fair-Low-Poor) |
|
Profit margin on sales |
|
3% |
|
|
Return on assets |
|
9% |
|
|
Receivable turnover |
|
16X |
|
|
Inventory turnover |
|
10X |
|
|
Fixed asset turnover |
|
2X |
|
|
Total asset turnover |
|
3X |
|
|
Current ratio |
|
2X |
|
|
Quick ratio |
|
1.5X |
|
|
Times interest earned |
|
7X |
|
2. Analysis:
Give your interpretation of what the ratios calculations show and how the business can use this information to improve its performance. Justify all answers.
