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For mathguy18 ONLY Ratio Analysis
Solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance.
Balance Sheet as of December 31, 2010
Gary and Company
Cash
$45
Accounts payables
$45
Receivables
66
Notes payables
45
In
ventory
159
Other current liabilities
21
Marketable securities
33
Total current liabilities
$111
Total current assets
$303
Net fixed assets
147
Long Term Liabilities
Total Assets
$450
Long-term debt
24
Total Liabilities
$135
Owners Equity
Common stock
$114
Retained earnings
201
Total stockholders equity
315
Total liabilities and equity
$450
Income Statement Year 2010
Net sales
$795
Cost of goods sold
660
Gross profit
135
Selling expenses
73.5
Depreciation
12
EBIT
49.5
Interest expense
4.5
EBT
45
Taxes (40%)
18
Net income
27
1. Calculate the following ratios AND interpret the result against the industry average:
Ratio
Your Answer
Industry Average
Your Interpretation
(Good-Fair-Low-Poor)
Profit margin on sales
3%
Return on assets
9%
Receivable turnover
16X
Inventory turnover
10X
Fixed asset turnover
2X
Total asset turnover
3X
Current ratio
2X
Quick ratio
1.5X
Times interest earned
7X
2. Analysis:
Give your interpretation of what the ratios calculations show and how the business can use this information to improve its performance. Justify all answers.
Assignment Grading Criteria
Has correctly calculated the ratios.
Has correctly analyzed and interpreted the significance of the resulting ratios and suggested actions for improvement.
Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; displayed accurate spelling, grammar, and punctuation
Answer
Business management homework help
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