5 You are Senior Analyst at Ajax Inc., a manufacturer of construction equip-

ment, which is considering the purchase of one of its suppliers, Zitron Ind-

ustries. The purchase has been given serious consideration by Ajax's board of

directors, and several discussions have taken place between the management

of both companies.

Zitron has submitted financial data for the past threeyears. Your boss, Ajax's

Controller, has asked you to analyze Zitron's financial statements and you

have prepared the following ratios comparing Zitron's three-year perform-

ance along with the current year's ratios for your company, Ajax, as well as

the industry averages

2023 2022 2021 Averages 2023

Zitron . Ajax | Industry

A. Inventory Turnover 3.2X 3.5X 3.6X 3.4X | 4.0X

B. Average sale period - Days 114Dys 104Dys 101Dys 106Dys | 91Dys

C. Accounts Receivable Turnover 6.98 7.25 7.83 7.78 | 8.11

D. Average Daily Sales in AR 52.3 50.34 46.6 46.9 | 45.0

E. Current Ratio 1.65 1.95 1.70 2.30 | 1.95

F. Times Interest Earned 3.87 3.46 3.28 3.56 | 3.50

G. Debt/Equity Ratio 0.50 0.46 0.40 0.45 | 0.50

H. Sales Growth/(Decline) 2.5% 1.5% (1.5%) | 4.5%| 5.6%|

I. Margin 6.0 5.9 5.6 6.0 6.5

J. Turnover [T/O] 5.3 5.6 5.9 5.6 | 6.0

In order to complete the report you must interpret your findings and make recommendations on how this information will be useful to the management of Zitron, in deciding whether they should seriously consider the takeover.

Required:

Complete the following report

Use the letters above to identify the various groups of ratios and provide

comments on how Ajax and Zitron are performing in each category as

opposed to how the industry is performing - An example has been done

to start the analysis.

Ajax Manufacturing Inc.

Report on Ajax Inc vs Zitron vs Industry

[ List the ratios by letter]

2023 2023

Zitron: 2023 2022 2021 Ajax Industry

Example: Profitability/Growth

I. Sales Growth/(Decline) 2.5% 1.5% (1.5%) | 4.5% | 5.6%|

Calculate the following for the mentioned companies

MARGIN%/GROSS MARGIN%/RESIDUAL INCOME[RI]

RETURN ON INVESTMENT[ROI]

RETURN ON EQUITY[ROE]

RETURN ON ASSETS[ROA]

EFFICIENCY/ACTIVITY

ACCOUNTS RECEIVABLE: TURNOVER; AVERAGE COLLECTION PERIOD; DAYS' SALES OUTSTANDING[DSO]

INVENTORY: TURNOVER; AVERAGE INVENTORY TURNOVER PERIOD/AVERAGE SALES PERIOD

TOTAL ASSET TURNOVER

AVERAGE PAYMENT PERIOD - PAYABLES

LIQUIDITY

WORKING CAPITAL

CURRENT RATIO

ACID TEST RATIO

CASH BURN RATE

LEVERAGE

DEBT/EQUITY

DEBT/ASSETS

TIMES INTEREST EARNED

FIXED CHARGES COVERAGE