4.3 Ratio Analysis

REQUIRED. For each of the Ratios on the list below:

1. Provide a definition.
2. Calculated the ratio from ABC's Financial Statements (ABC Financial Statements on next page).
3. Provide analysis on whether the Ratio indicates a favourable of non-favourable result.

Ratio List:

1. Current Ratio
2. Acid Test Ratio
3. Average Receivables (will have to use 2022 & 2021)
4. Day Sales Collected
5. Average Inventory
6. Inventory Turnover
7. Debt Ratio
8. Times interest earned
9. Profit Margin Ratio
10. Return on Assets

If any of these ratios were not part of you textbook or course, you are expected to conduct your independent research to provide a definition, apply the formula and provide the analysis.

ABC Company Income Statement period 1 January to 31 December 202X 2022 2021 Sales 2,486,000 2,075,000 Cost of Good Sold 1,523,000 1,222,000 Gross Profit 963,000 853,000 Operating Expenses 778,000 750,000 Operating Income 185,000 103,000 Interest Expense 44,000 46,000 Income before taxes 141,000 57,000 Income taxes 47,000 19,000 Net Income 94,000 38,000 ABC Company BALANCE SHEET as at the 31 December 202X 2022 2021 Assets Current Assets Cash 79,000 42,000 Short-term Investments 65,000 96,000 Accounts receivable 120,000 100,000 Merchandising Inventory 250,000 265,000 Total Current Assets 514,000 503,000 Property, Plant Equipment 1,170,000 1,175,000 Total Assets 1, 684,000 1,678,000 Liabilities Current Liabilities Accounts Payable 164,000 190,000 Credit Facilities (Short term loans) 75,000 90,000 Wages payable 26,000 12,000 Total Current Liabilities 265,000 292,000 Long tern Liabilities Mortgage 400,000 420,000 Total Liabilities 665,000 712,000 Equity Owners equity 475,000 475,000 Retained Earnings 544,000 491,000 Total Equity 1, 019,000 966,000 Total Equity & Liabilities 1, 684,000 1,678,000