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Critical Thinking assignment Module 2
Ratio Analysis The Vanguard Group, Inc. has compiled the following financial statements and comparative financial ratios for the year-end review.
Balance Sheet Vanguard Group, Inc.
December 31, 2007
Assets Current assets Cash $ 118,750 Accounts receivable 296,250 Inventory 303,750 Total current assets $ 718,750 Gross fixed assets $625,000 Less: Accumulated depreciation 93,750 Net fixed assets 531,250 Total assets $1,250,000 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 111,250 Notes payable 211,250 Accruals 108,750 Total current liabilities $ 431,250 Long-term debt 235,000 Total liabilities $ 666,250 Stockholders’ equity Common stock 318,750 Retained earnings 265,000 Total stockholders’ equity $ 583,750 Total liabilities and stockholders’ equity $1,250,000
Income Statement Vanguard Group, Inc.
for the Year Ended December 31, 2007
Sales revenue $1,680,000 Cost of sales 1,362,480 Gross profits $ 317,520 Less: Operating expenses Selling expense $ 125,600 General and administrative expense 81,600 Depreciation expense 24,000 Total operating expense $231,200 Operating profits $ 86,320 Less: Interest expense 15,600 Net profits before taxes $ 70,720 Less: Taxes (40%) 28,288 Net profits after taxes $ 42,432
Historical and Industry Average Ratios Vanguard Group, Inc.
Industry Average Ratio 2005 2006 2007 2007
Current ratio 1.6 1.7 — 1.6 Quick ratio 0.9 1.0 — 0.9 Inventory turnover 6.0 5.0 — 8.4 Average collection period 40 days 50 days — 40 days Total asset turnover 1.5 1.5 — 1.75 Debt ratio 60% 56% — 50% Times interest earned 2.5 3.5 — 4.0 Gross profit margin 20% 19.7% — 20% Operating profit margin 4.7% 4.8% — 6% Net profit margin 2.0% 2.3% — 3% Return on investment 3.0% 3.5% — 5.25% Return on equity 7.5% 7.95% — 10.5%
1. Calculate the firm’s 2007 financial ratios. 2. Prepare an executive summary on the firm’s overall financial condition and performance. Your
summary must be at least one page, but no more than 3 pages. Comment on the meaning of each ratio, discussing its trend and its comparison to the industry average.
20160531222100fin300_ctrubric_mod_2_rubric.pdf
FIN300 Critical Thinking Rubric ‐ Module 2
Meets Expectation Approaches
Expectation Below Expectation Limited Evidence
Content, Research, and Analysis 13‐15 Points 10‐12 Points 7‐9 Points 4‐6 Points Requirements The ratio analysis
and interpretation includes all of the required components, as specified in the assignment.
The ratio analysis and interpretation includes most of the required components, as specified in the assignment.
The ratio analysis and interpretation includes some of the required components, as specified in the assignment.
The ratio analysis and interpretation includes few of the required components, as specified in the assignment.
13‐15 Points 10‐12 Points 7‐9 Points 4‐6 Points Content Demonstrates
strong or adequate knowledge of the financial data; correctly represents knowledge from the source material.
Some significant but not major errors or omissions in demonstration of knowledge.
Major errors or omissions in demonstration of knowledge.
Fails to demonstrate knowledge of the materials.
21‐25 Points 16‐20 Points 11‐15 Points 6‐10 Points Calculation of Financial Ratios
Performs accurate calculation of at least 10 of the 12 required financial ratios.
Performs accurate calculation of 7 to 9 of the required financial ratios.
Performs accurate calculation of 4 to 6 of the required financial ratios.
Performs accurate calculation of fewer than 5 required financial ratios.
13‐15 Points 10‐12 Points 7‐9 Points 4‐6 Points Executive Summary
Executive summary explains the meaning of at least 10 of the 12 required financial ratios, discussing its trend and its comparison to the industry average.
Executive summary explains the meaning of 7 to 9 of the required financial ratios, discussing its trend and its comparison to the industry average.
Executive summary explains the meaning of 4 to 6 of the required financial ratios, discussing its trend and its comparison to the industry average.
Executive summary explains the meaning of fewer than 5 required financial ratios, discussing its trend and its comparison to the industry average.
13‐15 Points 10‐12 Points 7‐9 Points 4‐6 Points Explanation of Financial Condition
Demonstrates strong or adequate explanation in executive summary of the firm’s overall financial condition and performance.
Some significant but not major errors or omissions in explaining the firm’s overall financial condition and performance in executive summary.
Major errors or omissions in explaining the firm’s overall financial condition and performance in executive summary.
Fails to explain the firm’s overall financial condition and performance in executive summary.
FIN300 Critical Thinking Rubric ‐ Module 2
Mechanics and Writing 25‐30 Points 19‐24 Points 13‐18 Points 7‐12 Points Demonstrates college‐level proficiency in organization, grammar and style.
Project is clearly organized, well written, and in proper format as outlined in the assignment. Strong sentence and paragraph structure; few errors in grammar, spelling, or APA style.
Project is fairly well organized and written, and is in proper format as outlined in the assignment. Reasonably good sentence and paragraph structure; significant number of errors in grammar, spelling, or APA style.
Project is poorly organized; does not follow proper paper format. Inconsistent to inadequate sentence and paragraph development; numerous errors in grammar, spelling, or APA style.
Project is not organized or well written, and is not in proper paper format. Poor quality work; unacceptable in terms of grammar, spelling, and/or APA style.
Total points possible = 115
