2021-1 ITF 311 - Business Finance 3 MET_N MERT KOBA_ | 12/19/21 4:19 PM Homewor HW Score: 0%, 0 of 100 points O Points: 0 of 30 Save Integrative: Complete ratio analysis Given the following financial statements, historical ratios, and industry averages calculate Sterling Company's financial ratios for the most recent year. (Assume a 365-day year.) Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis into evaluations of the firm's liquidity, activity, debt, profitability, and market. The current ratio is (Round to two decimal places.) - X Data table (Click the icon here in order to copy the contents the data table below into a spreadsheet.) Sterling Company Income Statement for the Year Ended December 31, 2022 Sales revenue $10,020,000 Less: Cost of goods sold 7,513,000 Gross profits $2,507,000 Less: Operating expenses Selling expense $292,000 General and administrative expenses 657,000 Lease expense 49,500 Depreciation expense 216,000 Total operating expense 1,214,500 Operating profits $1,292,500 Less: Interest expense 188,000 Net profits before taxes $1,104,500 Less: Taxes (rate = 21%) 231,945 Net profits after taxes $872,555 Less: Preferred stock dividends 53,550 Earnings available for common stockholders $819,005 Earnings per share (EPS) $3.79 (Click the icon here in order to copy the contents the data table below into a spreadsheet.) Sterling Company Balance Sheet December 31, 2022 Assets Liabilities and Stockholders' Equity Current assets Current liabilities Cash $211,000 Accounts payable [b] $884,000 Marketable securities 52,100 Notes payable 194,000 Accounts receivable 791,000 Accruals 115,000 Inventories 930,000 Total current liabilities $1,193,000 Total current assets $1,984,100 Long-term debt (includes financial leases) [C] $2,948, 100 Gross fixed assets (at cost) [a] $11,983,000 Stockholders' equity Less: Accumulated depreciation 3,023,000 Preferred stock (23,800 Print Done Data table e protits petore taxes Less: Taxes (rate = 21%) Net profits after taxes Less: Preferred stock dividends Earnings available for common stockholders Earnings per share (EPS) 1,104,500 231,945 $872,555 53,550 $819,005 $3.79 (Click the icon here in order to copy the contents of the data table below into a spreadsheet.) Sterling Company Balance Sheet December 31, 2022 Assets Liabilities and Stockholders' Equity Current assets Current liabilities Cash $211,000 Accounts payable [b] $884,000 Marketable securities 52,100 Notes payable 194,000 Accounts receivable 791,000 Accruals 115,000 Inventories 930,000 Total current liabilities $1,193,000 Total current assets $1,984,100 Long-term debt (includes financial leases) [c] $2,948, 100 Gross fixed assets (at cost) [a] $11,983,000 Stockholders' equity Less: Accumulated depreciation 3,023,000 Preferred stock (23,800 Net fixed assets $8,960,000 shares, $2.25 dividend) $975,000 Common stock (216,000 Other assets $1,001,000 shares at $3.00 par) [d] 648,000 Paid-in capital in excess of par value 5,175,000 Retained earnings 1,006,000 Total stockholders' equity $7,804,000 Total liabilities and Total assets $11,945, 100 stockholders' equity $11,945, 100 [a] The firm has an 8-year financial lease requiring annual beginning-of-year payments of $49,500. Five years of the lease have yet to run. [b] Annual credit purchases of $6,185,000 were made during the year. [c] The annual principal payment on the long-term debt is $89,000. [d] On December 31, 2022, the firm's common stock closed at $38.24 per share. Print Done Data table (Click the icon here in order to copy the contents of the data table below into a spreadsheet.) 0.20 Historical and Industry Average Ratios for Sterling Company Ratio Actual 2020 Actual 2021 Industry average, 2022 Current ratio 1.39 1.54 1.84 Quick ratio 1.00 0.92 1.05 Inventory turnover 9.71 9.40 8.79 Average collection period 45.2 days 36.5 days 35.10 days Average payment period 58.5 days 60.8 days 45.6 days Total asset turnover 0.75 0.81 0.75 Debt ratio 0.20 0.30 Times interest earned ratio 8.6 7.7 8.4 Fixed-payment coverage ratio 5.0 4.7 4.7 Gross profit margin 0.30 0.27 0.25 Operating profit margin 0.12 0.12 0.10 Net profit margin 0.083 0.083 0.074 Return on total assets (ROA) 0.063 0.068 0.058 Return on common equity (ROE) 0.091 0.097 0.096 Earnings per share (EPS) $2.49 $2.94 $2.24 Pricelearnings (P/E) ratio 9.1 7.6 8.3 Market/book (M/B) ratio 1.25 1.10 1.15 Print Done