CEO, Shyla Arana recently hired you to be the financial analyst for Callahan Boat Builders, a manufacturer of fiberglass power boats and sailing yachts. Your first task is to conduct a financial analysis of the firm covering the last two years. Your boss, Shyla, provided you with the following financial statements and other data. Balance Sheets Assets 2020 2019 Cash $ 52,000 $ 57,600 Accounts receivable Inventories Total current assets Gross fixed assets Less accumulated depreciation 402,000 836,000 $1,290,000 527,000 166,200 351,200 715,200 $1,124,000 Net fixed assets $ 360,800 $1,650,800 491,000 146,200 $ 344,800 $1,468,800 Total assets Liabilities and Equity Accounts payable Notes payable Accruals $ 175,200 225,000 140,000 $ 145,600 200,000 136,000 Total current liabilities $ 540,200 $ 481,600 Long-term debt 424,612 Common stock (100,000 shares) 460,000 323,432 460,000 Retained earnings 225,988 203,768 Total equity $ 685,988 $ 663,768 Total liabilities and equity $1,650,800 $1,468,800 Income Statements Sales Cost of goods sold Other expenses ( 430,300) Depreciation ( 20,000) Total operating costs $3,700,300 2020 $3,850,000 (3,250,000) 2019 $3,432,000 (2,864,000) ( 340,000) (18,900) $3,222,900 EBIT $ 149,700 $ 209,100 EBT Interest expense Taxes (10%) (76,000) ( 62,500) $ 73,700 $ 146,600 (29,480) Net income $ 44,220 EPS $0.412 (58,640) $ 87,960 $0.880 Statement of Cash Flows (2020) Operating Activities Net income Other additions (sources of cash) $ 44,220 Depreciation 20,000 Increase in accounts payable 29,600 Increase in accruals 4,000 Subtractions (uses of cash) Increases in accounts receivable (50,800) Increase in inventories Net cash flow from operations (120,800) $(73,780) Long-Term Investing Activities Investment in fixed assets Financing Activities Increase in notes payable Increase in long-term debt Payment of cash dividends Net cash flow from financing Net reduction in cash account Cash at beginning of year Cash at end of year $ 25,000 101,180 (22,000) $( 36,000) $104,180 $( 5,600) 57,600 $ 52,000 Other Data December 31 stock price 2020 $6.00 Number of shares 100,000 Dividends per share $0.22 Lease payments $40,000 2019 $8.50 100,000 $0.22 $40,000 Industry average data for 2020: Ratio Current Quick Industry Average 2.7x 1.0x Inventory turnover Days sales outstanding (DSO) Fixed assets turnover 6.0x 32.0 days 10.7x Total assets turnover 2.6x Debt ratio 50.0% TIE 2.5x Fixed charge coverage 2.1x Net profit margin 3.5% ROA 9.1% ROE 18.2% Price/earnings 14.2x Market/book 1.4x Question 1 Financial ratios are used to get an idea about the future financial condition of a firm by determining how well the company is being operated and where it needs improving. Match the ratio categories and their purposes. Liquidity Asset utilization Debt utilization Profitability 5 pts [Choose ] [Choose ] Are costs under good control as reflected in the profit margin, ROE, and ROE? Measures the company's efficiency at being able to generate returns from its assets. Are the investments in assets about right in view of sales levels? Does the company have about the right amount of debt or is it over leveraged? Do investors like what they see as reflected in the P/E and EPS ratios? Can the company make required payments in the short run (defined as the next year)? [Choose ] Market Values [Choose ]