The Jimenez Corporation\'s forecasted 2011 financial statements follow, along wi
ID: 2702783 • Letter: T
Question
The Jimenez Corporation's forecasted 2011 financial statements follow, along with some industry average ratios.
Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2011
Jimenez Corporation: Forecasted Income Statement for 2011
P/E ratio
Liability to assets ratio
6.0
50%
Calculate Jimenez's 2011 forecasted ratios, compare them with the industry average data, and comment briefly on Jimenez's projected strengths and weaknesses. Round DSO to the nearest whole. Round the other ratios to one decimal place.
Debt to asset ratio
liability to asset ratio
21.0%
50.0%
________________
_
So, the firm appears to be _________________ managed.
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 and notes payable $432,000 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
Ratios
Firm
Industry
Comment
Quick ratio (511000/602000)
___.8_____
1.0
____Weak____________
Current ratio (1405000/602000)
____2.3____
2.7
___ Weak ___________
Inventory turnover(4290000/894000)
____4.8____
7.0
_Poor________________
Days sales outstanding (439000/4290000/365)
__37.4______ days
32 days
___Poor______________
Fixed assets turnover (4290000/431000)
_10.0_______
13.0
__Poor_______________
Total assets turnover(4290000/1836000)
__2.3______
2.6
___Poor______________
Return on assets (108408/1836000)
__5.9______ %
9.1%
____Bad_____________
Return on equity
(108408 /829710)
_13.1_______ %
18.2%
____Bad_____________
Debt ratio (1006290/1836000)
__54.8______ %
50.0%
___High______________
Profit margin on sales(108408/4290000)
___2.5_____ %
3.5%
__Bad_______________
EPS
$4.71
n.a.
--
Stock Price
$23.57
n.a.
--
P/E ratio (23.57 /4.71)
__5.0______
6.0
__Poor_______________
P/CF ratio
__2.0______
3.5
__Poor_______________
M/B ratio
0.65
n.a.
--
So, the firm appears to be Badly managed. All the ratios are less than the industry ratios when compared .The company must improve itself to do better.
All of the ratios are very low. For example; Inventory Turnover ratio, Assets Turnover ratio, Return on Assets. These ratios can be improved by decreasing the inventory level. Decrease in inventory level may also have positive effect on the current ratio which will improve the financial position of the company .If the inventory level is reduced then the liabilities will also decrease this will also help in improving the financial position of the business .If the cost of goods sold will be decreased then it will improve all the profitability ratios and if more dividend is not paid then it will increase the retained earnings . This will result in lower debt ratio and all other ratios like market book ratio will increase and market price of the shares will also improve.
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