ANALYSIS, INTERPRETATION & RECOMMENDATION

In this section of the exam,please avoid unnecessary detail. Be clear and specific in responding to questions or in identifying areas for further investigation:

As the head of the Planning and Analysis department you have received the following report for the period just ended

You are Senior Analyst at Ajax Inc., a manufacturer of construction equipment, which is considering the purchase of one of its suppliers, Zitron Industries. The purchase has been given serious consideration by Ajax's board ofdirectors, and several discussions have taken place between the managementof both companies.

Zitronhas submitted financial data for the pastthreeyears. Your boss, Ajax'sController, has asked you to analyze Zitron's financial statements and youhave prepared the following ratios comparing Zitron's three-yearperformance along with the current year's ratios for your company, Ajax, as well asthe industry averages.

201820172016Averages2018

Zitron.Ajax|Industry

A.Inventory Turnover3.2X3.5X3.6X3.4X|4.0X

B.Average sale period - Days114Dys104Dys101Dys106Dys |91Dys

C.Accounts Receivable Turnover6.987.257.837.78|8.11

D.Average Daily Sales inAR52.350.3446.646.9|45.0

E.CurrentRatio1.651.951.702.30|1.95

F.Times Interest Earned3.873.463.283.56|3.50

G.Debt/EquityRatio0.500.460.400.45|0.50

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

I.Margin6.05.95.66.06.5

J.Turnover [T/O]5.35.65.95.6|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 the company.

Required:

Usethe letters above to identify the various groups of ratios and providecomments on how Ajax and Zitron are performing in each category asopposed to how the industry is performing -An example has been doneto start the analysis.

AjaxManufacturing Inc.

Reporton Ajax Inc vs Zitron vs Industry

[ List the ratios by letter]

20172017

Zitron:201720162015AjaxIndustry

Example: Profitability/Growth

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

Comments:

Here are the formulas for:

Margin- >OITurnover- >SalesROI-> Margin x Turnover

SalesAOA

RI -> OI - (MRROR x AOA)