The Jimenez Corporation’s forecasted 2008 financial statements follow, along with some industry average ratios. 

a. Calculate Jimenez’s 2008 forecasted ratios, compare them with the industry average data, and comment briefly on Jimenez’s projected strengths and weaknesses.
b. What do you think would happen to Jimenez’s ratios if the company initiated cost-cutting measures that allowed it to hold lower levels of inventory and substantially decreased the cost of goods sold? No calculations are necessary. Think about which ratios would be affected by changes in these two accounts.

Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2008

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Cash Accounts receivable Inventories Total current assets Fixed assets Total assets Accounts and notes payable Accruals Total current liabilities Depreciation Earnings before taxes (EBT) Taxes (40%) Net income Per-Share Data EPS Cash dividends per share P/E ratio $ $602,000 Long-term debt 404,290 Common stock 575,000 Retained earnings 254,710 Total liabilities and equity $ 1,836,000 Jimenez Corporation: Forecasted Income Statement for 2008 Sales Cost of goods sold Selling, general, and administrative expenses Market price (average) Number of shares outstanding 72,000 439,000 894,000 $ 1,405,000 431,000 $ 1,836,000 $ 432,000 170,000 $4,290,000 3,580,000 370,320 159,000 $ 180,680 72,272 $ 108,408 $4.71 $0.95 5x $23.57 23,000