Chapter 3 FINANCIAL RATIO ANALYSIS
Dancing Water Company: December 31 Balance Sheets
(Thousands of Dollars)
Assets			2015	2016
Cash and cash equivalents			$20,000	$21,000
Short-term investments			3,240	3,759
Accounts Receivable			48,000	52,500
Inventories			56,000	84,000
Total current assets			$127,240	$161,259
Net fixed assets			200,000	218,400
Total assets			$327,240	$379,659
Liabilities and equity
Accounts payable			$32,000	$33,600
Accruals			12,000	12,600
Notes payable			6,480	19,929
Total current liabilities			$50,480	$66,129
Long-term debt			58,320	67,662
Total liabilities			$108,800	$133,791
Common stock			178,440	183,793
Retained Earnings			40,000	62,075
Total common equity			$218,440	$245,868
Total liabilities and equity			$327,240	$379,659
Dancing Water Company: December 31 Income Statements
(Thousands of Dollars)
			2015	2016
Sales			$400,000	$420,000
Expenses excluding depr. and amort.			320,000	327,600
EBITDA			$80,000	$92,400
Depreciation and Amortization			18,000	19,660
EBIT			$62,000	$72,740
Interest Expense			4,460	5,740
EBT			$57,540	$67,000
Taxes (40%)			23,016	26,800
Net Income			$34,524	$40,200
Common dividends			$17,262	$18,125
Addition to retained earnings			$17,262	$22,075
Other Data			2015	2016
Year-end Stock Price			$96.00	$90.00
# of shares (Thousands)			4,000	4,052
Lease payment (Thousands of Dollars)			$20,000	$20,000
Sinking fund payment (Thousands of Dollars)			$0	$0
NAME:					SECTION:	SPRING 2017 T-TH
Ratio Analysis			2015	2016	Industry Average			c. Perform a common size analysis.
Liquidity Ratios
Current Ratio					2.58x			Common Size Balance Sheets
Quick Ratio					1.53x			Assets			2015	2016
Asset Management Ratios								Cash and cash equivalents
Inventory Turnover					7.69x			Short-term investments
Days Sales Outstanding					47.45 days			Accounts Receivable
Fixed Assets Turnover					2.04x			Inventories
Total Assets Turnover					1.23x			Total current assets
Debt Management Ratios								Net fixed assets
Debt Ratio					32.1322%			Total assets
Times-interest-earned ratio					15.33x
EBITDA coverage ratio					4.18x			Liabilities and equity			2015	2016
Profitability Ratios								Accounts payable
Profit Margin					8.8560%			Accruals
Basic Earning Power					19.4842%			Notes payable
Return on Assets					10.9279%			Total current liabilities
Return on Equity					16.1018%			Long-term debt
Market Value Ratios								Total liabilities
Earnings per share					NA			Common stock
Price-to-earnings ratio					10.65x			Retained Earnings
Cash flow per share					NA			Total common equity
Price-to-cash flow ratio					7.11x			Total liabilities and equity
Book Value per share					NA
Market-to-book ratio					1.72x			Common Size Income Statements			2015	2016
								Sales
a. Has Dancing Water's profitability position improved or worsened? Explain using ALL FOUR PROFITABILITY ratios,								Expenses excluding depr. and amort.
INTERNALLY OVER TIME and EXTERNALLY with the Industry Average								EBITDA
								Depreciation and Amortization
								EBIT
								Interest Expense
								EBT
								Taxes (40%)
								Net Income
b. Has Dancing Water's ability to manage its assets improved or worsened? Explain and analyze ALL FOUR								d. Perform an extended Du Pont analysis for 2015 and 2016.
Asset Management ratios, INTERNALLY OVER TIME and EXTERNALLY with the Industry Average									PM x	TAT x	EM	= ROE
								2015
								2016