Corporate Finance

Income Stmt info: 2016 2017 Sales $975,000 $1,072,500 less Cost of Goods Sold: 325,000 346,125 Gross Profit 650,000 726,375 Operating Expenses 575,000 609,500 Earnings before Interest & Taxes 75,000 116,875 Interest exp 25,000 31,000 earnings before Taxes 50,000 85,875 Taxes 20,000 34,350 Net Income $30,000 $51,525

Balance Sheet info: 12/31/2016 12/31/2017 Cash 60,000 $63,600 Accounts Receivable 80,000 $84,000 Inventory 110,000 $126,500 Total Current Assets $250,000 $274,100 Fixed Assets (Net) $300,000 $312,000 Total Assets $550,000 $586,100

Current Liabilities $130,000 $149,500 Long Term Liabilities $150,000 $170,000 Total Liabilities $280,000 $319,500 Stockholders Equity $270,000 $266,600 Total Liab & Equity: $550,000 $586,100

Compute each of the following ratios for 2016 and 2017 and indicate whether each ratio was getting “better’ or “worse” from 2016 to 2017 and whether the 2017 ratio was “good” or “bad” compared to the Industry Avg (round all numbers to 2 digits past the decimal place) 2016 2017 Getting Better or Getting Worse? 2017 Industry Avg “Good” or “Bad” c‘Mpared to Industry Avg Profit Margin 0.67 0.68 better 0.09

Current Ratio 1.92:1 1.83:1 worse 1.80 good Quick Ratio 1.12 Return on Assets 0.18 Debt to Assets 0.60 Receivables turnover 12.00 Avg. collection period* 22.10 Inventory Turnover** 8.25 Return on Equity 0.16 Times Interest Earned 8.15
*Assume a 360 day year “Inventory Turnover can be computed 2 different ways.

 

 

 

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