Account Name Value Accounts payable 5800 Accounts receivable 10600 Accumulated d
ID: 2708626 • Letter: A
Question
Account Name ValueAccounts payable 5800
Accounts receivable 10600
Accumulated depreciation 34000
Cash 17550
Common stock (10,000 shares) 46000
Cost of goods sold 6,750
Depreciation expense 600
Earnings before taxes ?????
General & admin expense 950
Gross buildings & equipment 123000
Gross profits 26,250
Interest expense 4,300
Inventories 7500
Long-term debt 56000
Net buildings & equipment 89000
Net income ?????
Operating income (EBIT) ?????
Retained earnings 16150
Sales 33,000
Short-term notes payable 700
Taxes @40% 8,160
Use this template for Part 3:
Ratio Company Year 1 Company Year 2 Industry Average Cross Sectional Analysis (% Difference) Trend Analysis
Current Ratio 5x 3x 4x Declining by 25% from I.A. ?
Quick Ratio 3x 1.6x 3x ? Decreasing
Total Asset Turnover .4x .56x .7x Increasing,but still 20% below I.A. Improving
Average Collection Period 130 days 110 days 100 days 10% longer than I.A ?
Inventory Turnover 1.20x 1.41 x 2.2x 35% below I.A. Improving
Fixed Asset Turnover 1.01x 1.20x 1.1x About 10% above I.A. ?
Debt Ratio 30% 34% 33% About 3& above I.A. Increasing
Times Interest Earned 4.0x 5.0x 6.0x ? Increasing
Return on Common Equity 8% 12% 10% About 20% above I.A. ?
Summarize Your Findings Below: Write out your answer here!
Account Name Value
Accounts payable 5800
Accounts receivable 10600
Accumulated depreciation 34000
Cash 17550
Common stock (10,000 shares) 46000
Cost of goods sold 6,750
Depreciation expense 600
Earnings before taxes ?????
General & admin expense 950
Gross buildings & equipment 123000
Gross profits 26,250
Interest expense 4,300
Inventories 7500
Long-term debt 56000
Net buildings & equipment 89000
Net income ?????
Operating income (EBIT) ?????
Retained earnings 16150
Sales 33,000
Short-term notes payable 700
Taxes @40% 8,160
Use this template for Part 3:
Ratio Company Year 1 Company Year 2 Industry Average Cross Sectional Analysis (% Difference) Trend Analysis
Current Ratio 5x 3x 4x Declining by 25% from I.A. ?
Quick Ratio 3x 1.6x 3x ? Decreasing
Total Asset Turnover .4x .56x .7x Increasing,but still 20% below I.A. Improving
Average Collection Period 130 days 110 days 100 days 10% longer than I.A ?
Inventory Turnover 1.20x 1.41 x 2.2x 35% below I.A. Improving
Fixed Asset Turnover 1.01x 1.20x 1.1x About 10% above I.A. ?
Debt Ratio 30% 34% 33% About 3& above I.A. Increasing
Times Interest Earned 4.0x 5.0x 6.0x ? Increasing
Return on Common Equity 8% 12% 10% About 20% above I.A. ?
Summarize Your Findings Below: Write out your answer here!
Explanation / Answer
Around 47% below IA
Findings-
1) Current ratio is deceasing which means that the company is less likely to meet its liabilities which fall due in the next 12 months. Also, it has gone below the industry average.
2)Quick ratio is decreasing. decreasing quick ratios generally suggest that the company is over-leveraged, struggling to maintain or grow sales, paying bills too quickly or collecting receivables too slowly
3.Total Asset Turnover - Total Asset Turnover is improving. That means your firm is utilizing all its assets - its asset base - efficiently to generate sales and that is a very good thing.
4.Average Collection Period- Average Collection Period is improving but it is still 10 days longer than industry average.Improvement indicates that it takes the company less time to turn its receivables into cash
5.Inventory Turnover - An increase in inventory turnover means that the company's sales have increased relative to its inventory, and this is a good thing.
6.Fixed Asset Turnover- Fixed Asset Turnover is increasing which shows that the company has been more effective in using the investment in fixed assets to generate revenues.
7. Debt Ratio - Debt ratio has increased and is now above industry average. This means that company is using more debt to fuel investment
8.Times Interest Earned - An increasing Times Interest Earned usually indicates the company has been more able to cover the interest on the debt it has financed.
9. Return on Common Equity - Return on Common Equity has improved and which means company's profit margins have improved.
Around 47% below IA
Decreasing Total Asset Turnover .4x .56x .7x Increasing,but still 20% below I.A. Improving Average Collection Period 130 days 110 days 100 days 10% longer than I.A Improving Inventory Turnover 1.20x 1.41 x 2.2x 35% below I.A. Improving Fixed Asset Turnover 1.01x 1.20x 1.1x About 10% above I.A. Improving Debt Ratio 30% 34% 33% About 3& above I.A. Increasing Times Interest Earned 4.0x 5.0x 6.0x About 17% below I.A. Increasing Return on Common Equity 8% 12% 10% About 20% above I.A. ImprovingRelated Questions
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