Key Ratios for ABC, Inc and its industry. ABC, Inc. 1994 Ratios Industry Average

Q: Key Ratios for ABC, Inc and its industry. ABC, Inc. 1994 Ratios Industry Average

Since 1994, ABC's inventory management has: c. deteriorated => 1995 's Inventory Turnover = COGS / Closing Inventory = 140000 / 8700 = 16.09 times whereas 1994 's and Industry was 18.10 times and 20.30 times resp., so it is deteriorated by about 2 times

ID: 2727327 • Letter: K

Question

Key Ratios for ABC, Inc and its industry.

ABC, Inc. 1994 Ratios

Industry Average Rations in 1994

Current ratio

1.2

1.4

Acid test ratio

.89

.94

Average collection period

30 days

25 days

Inventory turnover

18.1

20.3

Fixed assets turnover

4.1

4.8

Total asset turnover

2.78

2.8

Debt ratio

50%

60%

Times-interest-earned

5.5%

4.5%

Net profit margin

1.15%

1.5%

Return on equity

5.21%

7.32%

ABC, Inc. Income Statement (in thousands) December 31, 1995
Sales (all credit)           $200,000
Cost of goods sold        140,000
Gross profit on sales      60,000
Operating expenses      56,000
Operating income         4,000
Interest expense           1,000
Earnings before tax      3,000
Income tax                   1,050
Net income available to common stockholders   $1,950

ABC, Inc. Balance Sheet (in thousands)  December 31, 1995
Assets
Cash         $2,000
Accounts receivable      17,800
Inventories           8,700
Total current assets      28,500
Gross fixed assets       70,000
Accumulated depreciation      26,500
Net fixed assets       43,500
Total assets        $72,000

Liabilities and Equity
Accounts payable       $18,000
Accruals           13,350
Total current liabilities      31,350
Long-term debt            8,250
Total liabilities       39,600
Common stock (par value and paid in capital)   2,000
Retained earnings      30,400
Total stockholders' equity     32,400
Total liabilities and equity      $72,000

Since 1994, ABC's inventory management has:

Select one:

a. improved

b. changed but in an indeterminate manner.

c. deteriorated

d. remained the same