Assignment 3: Ratio Analysis | Homework Helpers

Assignment 3: 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. Turn in your completed work to the M1: Assignment 3 Dropbox by Wednesday, November 5, 2014.
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.

Assignment 3 Grading Criteria    Maximum Points
Has correctly calculated the ratios.    40
Has correctly analyzed and interpreted the significance of the resulting ratios and suggested actions for improvement.    40
Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; displayed accurate spelling, grammar, and punctuation    20
Total:    100