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You have been given the following data on a competitor: Balance
You have been given the following data on a competitor:
Balance Sheets 2014 2015
Cash $ 57,600 $ 52,000
Accounts receivable 351,200 402,000
Inventory 715,200 836,000
Total current assets $ 1,124,000 $ 1,290,000
Gross Fixed assets $ 491,000 $ 527,000
Less: Accumulated Depreciation 146,200 166,200
Net fixed assets $ 344,800 $ 360,800
Total assets $ 1,468,800 $1,650,800
Accounts Payable $ 145,600 $ 175,200
Notes Payable 200,000 225,000
Accruals 136,000 140,000
Total current liabilities $ 481,600 $ 540,200
Long-term debt 323,432 424,612
Common stock 460,000 460,000
Retained earnings 203,768 225,988
Total equity $ 663,768 $ 685,988
Total claims $ 1,468,800 $ 1,650,800
Sales $ 3,432,000 $ 3,850,000
Cost of goods sold 2,864,000 3,250,000
Other expenses 340,000 430,300
Depreciation 18,900 20,000
EBIT $ 209,100 $ 149,700
Interest expense 62,500 76,000
EBIT $ 146,600 $ 73,700
Taxes (40%) 58,640 29,480
Net income $ 87,960 $ 44,220
December 31 stock price $8.50 $6.00
Number of share outstanding 100,000 100,000
Dividend per share $0.22 $0.22
Annual lease payment $40,000 $40,000
Engineering Management 535 (cont?d) Page 4.
Inventory turnover 7.0x
Days sales outstanding (DSO) 32.0 days
Fixed asset turnover 10.7x
Total asset turnover 2.6x
Debt ratio 50.0%
Fixed charge coverage 2.1x
Profit margin 3.5%
Basic earning power 19.1%
Define the term ?liquidity? within a financial statement analysis context. What are the current and quick ratios? Assess the firm?s liquidity position.
What are the inventory turnover, days sales outstanding, fixed asset turnover, and total asset turnover? How do the firm?s asset utilization ratios stack up against the industry averages?
What are the debt, times-interest-earned, and fixed charge coverage ratios? How does it compare with the industry with respect to financial leverage?
Calculate the profitability ratios, that is, its profit margin, return on assets (ROA), return on equity (ROE).
What is common size analysis? Briefly describe how it an be applied to income statements and balance sheets. Does common size analysis replace ratio analysis, or should it be used to supplement ratio analysis?
Please show all equations, calculations, and procedure so that I understand the process.
This question was answered on: Feb 21, 2020
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