Question
5.5 Eleanors Computers is a retailer of computer products. Using the financial data provided, complete the financial ratio calculations for 2016. Advise management of any
5.5 Eleanors Computers is a retailer of computer products. Using the financial data provided, complete the financial ratio calculations for 2016. Advise management of any ratios that indicate potential problems and provide an explanation of possible causes of the problems.
You are required to calculate ratios for 2016. Please complete these calculations in Excel. Please provide the formulas for each ratio. I will deduct points if you do not provide the formulas. Additionally, you are to advise management of any ratios that indicate a potential problems and provide an explanation of possible causes of the problems.This section should not be lengthy. You do not have enough information to conduct an in-depth analysis. Choose at least five (5) ratios to comment on. Complete this requirement in a Word document. Upload both files to the link provided here.
| Industry Averages | ||||
|---|---|---|---|---|
| Financial Ratios | 2014 | 2015 | 2016 | 2016 |
| Current ratio | 1.71X | 1.65X | 1.70X | |
| Quick ratio | 0.92X | 0.89X | 0.95X | |
| Average collection period | 60 days | 60 days | 65 days | |
| Inventory turnover | 4.20X | 3.90X | 4.50X | |
| Fixed asset turnover | 3.20X | 3.33X | 3.00X | |
| Total asset turnover | 1.40X | 1.35X | 1.37X | |
| Debt ratio | 59.20% | 61.00% | 60.00% | |
| Times interest earned | 4.20X | 3.70X | 4.75X | |
| Gross profit margin | 25.00% | 23.00% | 22.50% | |
| Operating profit margin | 12.50% | 12.70% | 12.50% | |
| Net profit margin | 6.10% | 6.00% | 6.50% | |
| Return on total assets | 8.54% | 8.10% | 8.91% | |
| Return on equity | 20.93% | 20.74% | 22.28% |
| Income Statement for Year Ended 12/31/16 | Balance Sheet at 12/31/16 | ||
|---|---|---|---|
| Sales | $1,500,000 | Cash | $ 125,000 |
| Cost of goods sold | 1,200,000 | Accounts receivable | 275,000 |
| Gross profit | $ 300,000 | Inventory | 325,000 |
| Operating expenses | 100,000 | Current assets | $ 725,000 |
| Operating profit | $ 200,000 | Fixed assets (net) | $420,000 |
| Interest expense | 72,000 | Total Assets | $1,145,000 |
| Earnings before tax | 128,000 | Accounts payable | $ 150,000 |
| Income tax (40%) | 51,200 | Notes payable | 225,000 |
| Net Income | $ 76,800 | Accrued liabilities | 100,000 |
| Current liabilities | 475,000 | ||
| Long-term debt | 400,000 | ||
| Total liabilities | $ 875,000 | ||
| Equity | 270,000 | ||
| Total liabilities and equity | $1,145,000 | ||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started