a. Analyze Ryan Boot Company, using ratio analysis. Compute the ratios on the prior page for Ryan and compare them to the industry data that is given. Discuss the weak points, strong points, and what you think should be done to improve the company's performance.
b. In your analysis, calculate the overall break-even point in sales dollars and the cash break-even point. Also compute the degree of operating leverage, degree of financial leverage, and degree of combined leverage. (Use footnote 2 for DOL and footnote 3 in the chapter for DCL.)
c. Use the information in parts a and b to discuss the risk associated with this company. Given the risk, decide whether a bank should lend funds to Ryan Boot.
Ryan Boot Company is trying to plan the funds needed for 20X2. The management anticipates an increase in sales of 20 percent, which can be absorbed without increasing fixed assets.
d. What would be Ryan's needs for external funds based on the current balance sheet? Compute RNF (required new funds). Notes payable (current) and bonds are not part of the liability calculation.
e. What would be the required new funds if the company brings its ratios into line with the industry average during 20X2? Specifically examine receivables turnover, inventory turnover, and the profit margin. Use the new values to recompute the factors in RNF (assume liabilities stay the same).
f. Do not calculate, only comment on these questions. How would required new funds change if the company
(1) Were at full capacity?
(2) Raised the dividend payout ratio?
(3) Suffered a decreased growth in sales?
(4) Faced an accelerated inflation rate?

Income Statement-20X1
Sates (credit)..............................................$7,000,000
Fixed costs*................................................2,100,000
Variable costs (0.60).......................................4,200,000
Earnings before interest and taxes.........................700,000
Less: Interest..................................................250,000
Earnings before taxes.......................................450,000
Less: Taxes @ 35%.......................................................157,500
Earnings after taxes.......................................$ 292,500
Dividends (40% payout)....................................117,000
Increased retained earnings..............................$ 175,500
*Fixed costs include (a) lease expense of $200,000 and (b) depreciation of $500,000

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RYAN BOOT COMPANY Balance Sheet December 31, 20Xl Assets Liabilities and Stockholders' Equity Ca S 50,000 Accounts pavable Accounts receivable Inventory Gross plant and equipment 80,000 3,000,000 1.000.000 $2,200,000 150,000 400.000 2,500.000 6,000,00 Common stock (1.7 million ,700,000 Accrued expenses Notes payable (current) Bonds (10%) shares, par value S1) Retained earnings Total liabilities and ess Accumulated depreciation... 2.000,000 1,180,000 $8,130,000 Total assets $8,130,000 stockholders' equity.. Ratios Ryan Boot (to be filled in) Profit margin Returm on assets Return on equitv Receivables turmover Inventorv turmover Fixed-asset turmover Total-asset turmover Current ratio Quick ratio Debt to total assets Interest coverage Fixed charge coverage Industry 5.75% 6.90% 9.20% 4.35X 6.50X 1.85X 1.20X 1.45X 1.10X 25.05% 5.35X 4.62X