3-18 The Lee Corporation's forecasted 2015 financial statements follow, along with some industry Comprehensive average ratios. Ratio Analysis a. Calculate Lee's 2015 forecasted ratios, compare them with the industry average data, and comment briefly on Lee's projected strengths and weaknesses. b. What do you think would happen to Lee'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. Lee Corporation: Forecasted Balance Sheet as at December 31, 2015 Cash $ 72.000 Accounts receivable 439,000 Inventories 694.000 Total current assets 1,205,000 631,000 Fixed assets Total assets $1,616.000 Accounts payable $ 332.000 Note payable 100,000 Accruals 170,000 Total current liabilities 662,000 Long-term debt 404.290 Common stock 575,000 Retained earnings 254,710 Total liabilities and equity $1,836,000 Lee Corporation: Forecasted Income Statement for 2015 Sales 56,350,000 Cost of goods sold 5,270,000 Selling, general, and administrative expenses 500,000 Depreciation 240,000 Earnings before taxes (EBT) 340,000 Taxes (30%) 102.000 Net income 238.000 Per-Shure Data EPS $9.52 Cash dividends per share $1.90 P/E 5x Market price (average) $47.60 Number of shares outstanding 25,000 Industry Financial Ratios (2015) Quick ratio 1.0x Current ratio 2.7x Inventory turnover Days sales outstanding 32 days Fixed assets turnover 130X Total assets turnover 2.6% Return on assets 9.15 Return on equity 18.25 Debt ratio 50.05 Profit margin on sales 3.5% P/E 6.0x P/cash flow 3.5x Industry wegens have been constant for the past year Sed on year-end balance sheet figures Calten is bedonday yas 70x