8/12/2019 Seatwork No. 3 Ratios

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Seatwork No. 3

FINANCIAL RATIO ANALYSIS

HORIZONTAL, VERTICAL, TREND ANALYSIS

I. Complete the balance sheet and sales information presented below for Sean Dominic Company, using the following ratios below:

Cash ? Accounts Payable ?Accounts Receivable ? Long-term debt 60,000Inventories ? Total Liabilities ?

Total Current Assets ? Capital Stock ?Net Fixed Assets ? Retained Earnings 97,500

Total Assets P 300,000 Total Liabilities and

Stockholders Equity

?

Sales ? Cost of Goods Sold ?

Financial data for 2013:1. Total debts to total assets ratio was 50%2. Quick ratio was 0.803. Total asset turnover 1.5x4. There are 360 days in a year5. The average collection period was 36 days6. Gross profit margin was 25%7. Inventory turnover was 5x (use COGS)

II. The following are the balance sheet and income statement data of XYZ Company:December 31

Balance Sheet Accounts: 2013 2012

Accounts payable 14,000 35,000Accounts receivable 59,000 69,000

Accrued expenses payable 3,500 2,000Building, net 71,000 63,000Cash 48,000 30,000Common stock/equity 224,000 200,000Income taxes payable 2,500 2,000Inventory 84,000 76,000Land 28,000 26,000Machinery, net 11,000 10,000Mortgage payable 35,000 35,000

Prepaid Insurance 4,000 3,000Retained earnings 26,000 3,000

Income statement accounts, 2013:

Cost of goods sold 22,000Depreciation expense - building 6,000

Depreciation expense - machinery 8,000Income taxes 15,000Interest expense 4,000Sales 100,000Selling and administrative expenses 20,000

Required:

1. Comparative balance sheet for 2012 and 2013.2. Income statement for 20133. Horizontal analysis of comparative balance sheet, 2012 and 2013.4. Vertical analysis of income statement for 20135. Calculate the indicated ratios for XYZ Company for 2013. Use 2 decimal places in your analysis, if needed.

Ratio XYZ Company Industry Average

Current 2.0x

Quick 1.5x

Days sales outstanding 35 days

Inventory turnover 6.5x

Total assets turnover 3.0x

Net profit margin 1.2%

Return on Assets 4%

Return on Common Equity 7%

6. Outline XYZs strengths and weaknesses as revealed by your analysis.III. Trend Analysis. Jupiter Company has provided the following comparative information:

2013 2012 2011 2010 2009

Net income $ 100,000 $ 150,000 $ 150,000 $ 22,000 $ 250,000Income tax expense 30,000 45,000 45,000 60,000 75,000Interest 144,000 138,000 138,000 126,000 120,000Average total assets 2,300,000 2,150,000 2,000,000 1,750,000 1,500,000Average total stockholders equity 1,100,000 1,000,000 850,000 700,000 500,000

You have been asked to evaluate the performance of the company over the last five years. To the extent the data permit, comment on the significantrelationships revealed by your analysis. Use 2009 as your base year.

8/12/2019 Seatwork No. 3 Ratios

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