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Analyze the common size balance sheets for Chang Dental Clinic for the years ending December 31, 2003, 2004 and 2005. Analyze any trends you observe in the data and evaluate Chang Dentals values relative to the associated Key Industry ratios in Exhibit 4 (if available and if applicable). Exhibit 4:
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2005 2004 2003 $ $ $ ASSETS Current Assets Cash Accounts receivable Inventory Prepaid expenses Total Current Assets 4,067 46,942 6,366 1,646 59,021 41,248 5,296 29,528 2,677 46,544 32,205 Long-term Assets Fixed assets Less: Accumulated amortization fixed assets Net fixed assets 69,834 (30,595) 39,239 60,625 (19,171) 41,454 36,408 (8,687) 27,721 Goodwill 1 Total Long-term Assets 39,240 41,455 27,722 TOTAL ASSETS $ 98,261 $ 87,999 $ 59,927 LIABILITIES AND OWNER'S EQUITY Liabilities Bank indebtedness Accounts payable Total Liabilities $ $ $ 10,929 10,929 39 10,724 10,763 8,201 8,173 16,374 OWNER'S EQUITY S. Chang, Capital 87,332 77,236 43,553 TOTAL LIABILITIES AND OWNER'S EQUITY $ 98,261 $ 87,999 $ 59,927 Exhibit 4 KEY INDUSTRY RATIOS RATIO 2005 2004 2003 Percentage of Total Assets: Cash Accounts receivable Inventory Fixed assets Intangibles 23.0% 5.7% 0.4% 42.8% 15.2% 22.3% 6.8% 0.4% 45.3% 12.8% 20.4% 6.8% 0.6% 47.4% 13.4% Percentage of Total Liabilities and Equity: Accounts payable Long-term debt Equity 3.0% 44.2% 7.0% 2.6% 41.0% 10.1% 2.7% 42.7% 3.8% Percentage of Total Sales: Operating expenses Net income before taxes 88.5% 9.7% 88.2% 9.6% 89.1% 8.6% Current ratio Acid test ratio 0.8 0.7 0.7 0.6 0.7 0.6 Age of accounts receivable Age of inventory Age of accounts payable' N/A N/A N/A N/A N/A N/A N/A N/A N/A Interest coverage 4.5% 3.8x 3.5% Debt to equity 71.6 29.4 59.0 Return on equity Return on assets 95.9% 18.1% 88.7% 15.5% 75.2% 13.5% Fixed asset turnover Total asset turnover 15.3x 4.7x 13.9% 4.8x 12.8x 5.9x 2005 2004 2003 $ $ $ ASSETS Current Assets Cash Accounts receivable Inventory Prepaid expenses Total Current Assets 4,067 46,942 6,366 1,646 59,021 41,248 5,296 29,528 2,677 46,544 32,205 Long-term Assets Fixed assets Less: Accumulated amortization fixed assets Net fixed assets 69,834 (30,595) 39,239 60,625 (19,171) 41,454 36,408 (8,687) 27,721 Goodwill 1 Total Long-term Assets 39,240 41,455 27,722 TOTAL ASSETS $ 98,261 $ 87,999 $ 59,927 LIABILITIES AND OWNER'S EQUITY Liabilities Bank indebtedness Accounts payable Total Liabilities $ $ $ 10,929 10,929 39 10,724 10,763 8,201 8,173 16,374 OWNER'S EQUITY S. Chang, Capital 87,332 77,236 43,553 TOTAL LIABILITIES AND OWNER'S EQUITY $ 98,261 $ 87,999 $ 59,927 Exhibit 4 KEY INDUSTRY RATIOS RATIO 2005 2004 2003 Percentage of Total Assets: Cash Accounts receivable Inventory Fixed assets Intangibles 23.0% 5.7% 0.4% 42.8% 15.2% 22.3% 6.8% 0.4% 45.3% 12.8% 20.4% 6.8% 0.6% 47.4% 13.4% Percentage of Total Liabilities and Equity: Accounts payable Long-term debt Equity 3.0% 44.2% 7.0% 2.6% 41.0% 10.1% 2.7% 42.7% 3.8% Percentage of Total Sales: Operating expenses Net income before taxes 88.5% 9.7% 88.2% 9.6% 89.1% 8.6% Current ratio Acid test ratio 0.8 0.7 0.7 0.6 0.7 0.6 Age of accounts receivable Age of inventory Age of accounts payable' N/A N/A N/A N/A N/A N/A N/A N/A N/A Interest coverage 4.5% 3.8x 3.5% Debt to equity 71.6 29.4 59.0 Return on equity Return on assets 95.9% 18.1% 88.7% 15.5% 75.2% 13.5% Fixed asset turnover Total asset turnover 15.3x 4.7x 13.9% 4.8x 12.8x 5.9x
