Finacial Management Wk1

By the due date assigned 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. Turn in your completed work to the Submissions Area through the end of the day.

   

Balance Sheet as of December 31, 2010

 

Gary and Company

 

Cash  

 

$45

 

 

Accounts payables  

 

$45

 

Receivables    

 

66

 

 

Notes payables 

 

45

 

Inventory

 

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.

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