Clean Works, a company in Beamsville Ontario asked you to assist the organization with its financial planning and to evaluate the organization's performance.

Clean Works initially focused its activities on decontaminating produce and its products have received high reviews for safety and reliability.The organization previously sold its products to small and large farmers.

With the onset of Covid-19, the company found a way to alter its equipment to sanitize N-95 masks.The company currently sells two models:Corona, which sells for $53,000 and Virus, which sells for $78,000.

Clean Works is interested in planning for next year's sales given the fluid and constantly changing scenario in the country related to the Covid-19 pandemic.Currently, the government would guarantee any bank loans needed for liquidity purposes.However, the company is concerned about its mask sanitizing activities.Numerous scenarios are possible, ranging from another wave of the pandemic requiring another lockdown of the country to the disappearance of the Covid-19 virus.Thus planning is very important in order to seize any opportunities but also to be prepared for low sales volumes.

The current financial statements for Clean Works is:

Clean Works Inc.

2019 Statement of Comprehensive Income

Sales

36,599,300

Cost of Goods Sold

26,669,496

Other Expenses

4,641,000

Depreciation

1,640,200

EBIT

3,648,604

Interest

573,200

Taxable Income

$3,075,404

Taxes (40%)

1,230,162

Net Income

1,845,242

Dividends

$560,000

Addition to Retained Earnings

1,285,242

Clean Works Inc.

2019 Statement of Financial Position

Assets

Liabilities

Current Assets

Current Liabilities

Cash

$396,900

Accounts Payable

$844,550

Accounts Receivable

637,560

Notes Payable

1,928,500

Inventory

933,400

Total Current Liabilities

2,773,050

Totalcurrent assets

$1,967,860

Long Term debt

5,050,000

Fixed assets

Owners' Equity

Net plant and equipment

$15,411,620

Common Stock

322,500

Retained earnings

9,233,930

Total equity

9,556,430

Total Assets

$17,379,480

Total liabilities and owners' equity

$17,379,480

Personal Protective Equipment Industry Ratios

Current Ratio

1.43

Quick Ratio

0.38

Cash Ratio

0.21

Total Asset turnover

0.85

Inventory turnover

6.15

Receivables turnover

9.82

Total debt ratio

0.52

Debt to equity ratio

1.08

Equity multiplier

2.08

Times interest earned

8.06

Cash coverage ratio

8.43

Profit margin

6.98%

Return on assets

10.53%

Return on equity

16.54%

Questions:

1. Using the financial statements provided for Clean Works, calculate the following ratios:
2. Current Ratio
3. Quick Ratio
4. Cash Ratio
5. Total Asset Turnover
6. Inventory Turnover
7. Total Debt Ratio
8. Equity Multiplier
9. Times Interest Earned
10. Cash Coverage Ratio
11. Profit Margin
12. Return on Assets
13. Return on Equity
14. Compare the performance of Clean Works to the industry.Comment on why the ratio might be viewed as positive or negative relative to the industry.
15. Calculate the internal growth rate and sustainable growth rate for Clean Works. What do these numbers mean?
16. Clean Works is planning for a growth rate of 12% next year.Calculate the External Financing Needed (EFN) for the company, assuming that the company is operating at full capacity.Can the company sales increase at this growth rate?