Comprehensive Ratio Analysis The Jimenez Corporation\'s forecasted 2014 financia
ID: 2636703 • Letter: C
Question
Comprehensive Ratio Analysis
The Jimenez Corporation's forecasted 2014 financial statements follow, along with some industry average ratios.
Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2014
Jimenez Corporation: Forecasted Income Statement for 2014
Calculate Jimenez's 2014 forecasted ratios, compare them with the industry average data, and comment briefly on Jimenez's projected strengths and weaknesses. Assume that there are no changes from the prior period to any of the operating balance sheet accounts. Round DSO to the nearest whole number. Round the other ratios to one decimal place.
Please calulate Inventory Turnover, Days sales outstanding and Debt Ratio.
Assets Cash $ 72,000 Accounts receivable 439,000 Inventories 894,000 Total current assets $1,405,000 Fixed assets 431,000 Total assets $1,836,000 Liabilities and Equity Accounts payable $ 332,000 Notes payable 100,000 Accruals 170,000 Total current liabilities $ 602,000 Long-term debt 404,290 Common stock 575,000 Retained earnings 254,710 Total liabilities and equity $1,836,000Explanation / Answer
Inventory Turnover ratio = Cost of Goods Sold / Inventory
Cost of Goods Sold = $3 580,000, Inventory = $ 894,000
Inventory Turnover Ratio = 3580000 / 894000 = 4 Times
(This Ratio can be Calculated on the basis of Sales also)
Days Sales Outstanding = Accounts Receivables / Credit Sales x 365
Accounts Receivables = $439,000, Credit Sales= $ 4,290,000 (All sales are assumed to be on credit)
Days Sales Outstanding = 439,000 / 4,290,000 x 365 = 37.35 Days
Debt Ratio:
Debt Ratio = Total Liabilities / Total Assets
Total Liabilities = 1,006,290 Total Assets = $1,836,000
Debt Ratio = 1,006,290 / 1,836,000 = 54.80%
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