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You  had answered my question on ratio analysis and this is the feed back i got back from the teacher. Please assist me here

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thanks for sending this to me. I did get a chance to take a look at things and have some questions.

 

For your long-term debt ratio in question 11, double-check your work. The formula us Long Term Debt / (Long Term Debt + Total Equity).

For your inventory turnover ratio in 12, the formula is sales/inventory. Please take another look.

For 14, net working capital please take another look at the numbers you put into the formula. They are off a bit.

16 - Return on Sales = Net Income/Sales.

For numbers 19 and 20, I know it said answer Y/N. I just want to make sure you know why this is the case. Are there particular things that made you believe this from the numbers you calculated in this assignment? If so, what are they specifically? Can you share that?




Madhu S Mahat

 

Fin 300

 

Ratio Analysis Assignment

 

Background information and questions for Assignment B

 

Rearrange this data into the Balance Sheet and P&L statement below.

 

Place the data into these financial statements:

 

Buildings

 

10,000

 

Mortgage

 

100

 

Cash

 

2,000

 

Accounts Payable

 

1,000

 

Short Term Loan

 

900

 

Accounts Receivable

 

500

 

Machinery & Equipment

 

1,800

 

Inventory

 

1,500

 

Long Term Loan

 

5,000

 

SG&A

 

150

 

Sales

 

3,000

 

Depreciation

 

30

 

Cost of Goods

 

2,100

 

Interest Expense

 

100

 

Taxes

 

200

 

Note for the financial statements below:

 

(The calculations that need to be made are noted in BOLD on the statements)

 

On the P&L Net Income must be calculated.

 

On the Balance Sheet Shareholders' Equity, Total Current Assets & Fixed Assets, Total Current

 

and Total Long Term Liabilities & Total Assets and Total Liabilities & Equity must be calculated.

 

Use these answers to complete Answer Sheet for Review Test B in the Item below.

 

You will also use these numbers to calculate the financial ratios in the online review

 

test/assignment.

 


 

BALANCE

 

SHEET

 

Cash

 

Accounts

 

Receivable

 

Inventory

 

Current

 

Assets

 

Buildings

 

Machinery

 

&

 

Equipment

 

Fixed Assets

 


 

Total Assets

 


 

Accounts

 

Payable

 

Short Term

 

500

 

Loan

 

Current

 

1,500

 

Liabilities

 

2,000

 


 

4,000 Mortgage

 


 

900

 

1,900

 

100

 


 

10,000

 


 

Long Term

 

Loan

 


 

5,000

 


 

1,800

 


 

Long Term

 

Liabilities

 


 

5,100

 


 

Shareholders'

 

Equity

 


 

8,800

 


 

11,800

 


 

Total

 

15,800 Liabilities &

 

Equity

 


 

P&L (aka

 

Income

 

Statement)

 

Sales

 


 

3,000

 


 

Cost of Goods

 


 

2,100

 


 

Gross Margin

 

(Gross Profit)

 

SG&A

 

Depreciation

 

expenses

 

Operating Profit

 

Interest expense

 

Taxes

 

Net Income

 


 

1,000

 


 

900

 

150

 

30

 

720

 

100

 

200

 

420

 


 

15,800

 


 

Questions to answer (the same questions you will encounter when you open up your

 

Assignment Manager (for P&L) to turn it in)

 

Question 1 7 points

 

What is the value of NET INCOME?

 

420

 

Question 2 5 points

 

What is the value of CURRENT ASSETS?

 

4,000

 

Question 3 5 points

 

What is the value of FIXED ASSETS?

 

11,800

 

Question 4 5 points

 

What is the value of CURRENT LIABILITIES?

 

1,900

 

Question 5 5 points

 

What is the value of LONG TERM LIABILITIES?

 

5,100

 

Question 6 5 points

 

What is the value of SHAREHOLDERS' EQUITY?

 

8,800

 

Question 7 5 points

 

What is the value of TOTAL LIABILITIES & EQUITY?

 

15,800

 

Question 8 4 points

 

Using what you calculated so far what is the CURRENT RATIO?

 

Current ratio = Current Assets/Current Liabilities

 


 

=4,000/1,900 = 2.11

 

Question 9 4 points

 

What is the QUICK or ACID TEST RATIO?

 

Quick Ratio = (Cash+ Cash Equivalents+ Short-term investments)/ Current liabilities

 

= (2,000+500)/1,900 = 1.32

 

Question 10 4 points

 

What is the TOTAL DEBT RATIO?

 

Total Debt Ratio = Total Liabilities/Total Assets

 

= (1,900+5,100)/15,800

 

=0.44

 

Question 11 4 points

 

What is the LONG TERM DEBT RATIO?

 

Long term debt ratio = Long term liabilities/Total Assets

 

=5,100/15,800 = 0.32

 

Question 12 4 points

 

What is the INVENTORY TURNOVER RATIO?

 

Inventory turnover ratio = Cost of goods sold/ Inventory

 

=2,100/1,500= 1.4

 

Question 13 6 points

 

What are the DAYS OF SALES IN RECEIVABLES?

 

Days of sales in receivables = accounts receivable / average sales per day

 

Assumption: 365 Days in a year

 

=500/(3,000/365) = 60.83 Days

 

Question 14 4 points

 

What is the value of NET WORKING CAPITAL?

 

Working Capital = current assets (cash, inventory, a/r) - current liabilities (a/p, short term debt)

 


 

Net working capital is similar to working capital but removes the cash and debt consideration

 

and simplifies the formula to a/r and inventory minus a/p.

 

Net working capital = 500+1,500- 1,000 = 1,000

 

Question 15 4 points

 

What is TOTAL ASSET TURNOVER?

 

Total Asset Turnover = Sales/Total Assets

 

=3,000/15,800 = 0.1898/18.98%

 

Question 16 4 points

 

What is this firm's RETURN ON SALES (ROS)?

 

ROS = Operating Income/ Sales =

 

=720/3,000 = 0.24/24%

 

Question 17 4 points

 

What is the firm's RETURN ON ASSETS?

 

ROA = Net Income/Total Assets

 

=420/15,800 = 0.0266/2.66%

 

Question 18 4 points

 

What is this firm's RETURN ON EQUITY?

 

ROE= Net Income/ Shareholders Equity

 

=420/8,800 = 0.0477/4.77%

 

Question 19 9 points

 

As a result of your analyses do you believe this is a firm that will stay in business? Please look at

 

your results for all ratios in this case along with the ratio interpretation sheet I showed you in

 

class. Then, simply answer YES or NO.

 

YES

 

Question 20 8 points

 

From the limited amount of data and analysis is this is a "reasonably well run company" that is

 

managing its finances well? Answer YES or NO

 

YES

 


 

 


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