das COMPREHENSIVE PROBLEMS You are the man oasi department. The sales mas pe order to a new purchase, Wizard l arge the has been prima stiling security and water sprinkle wystems in otticelles v ears, and The salespeople have been well and following linancial statements and industry rais (irom y they have also presented you with the they note that sales have increases e s. In the report the last two years due to Wizards gressive welling och The sales team is eager for you to want credit to Wiard Industries Of A nust do a complete analysis nating any is that are cause for connot require a further explanation. What is your commendation? Do you granit text? WIZARD INDUSTRIES Income Statements Year Ended 20XX IXW 20XV Sales(all on credit) S1.105.100 1.300 5 1542.700 Cost of goods sold .... 1.258,40 1397.400 1740 Gross profit...... 346,200 443,900 97,900 Selling and administrative expense.. 29.1.200 14.00 16.000 Amortization 6,13 172.050 52.700 Operating profil 45.100 50.50 Interest expense 1.450 700 122.100 Earnings before taxes 350 27.100 2200 THES $ 1.100 5 95.000 5 5.100 Farins available to common WIZARD INDUSTRIES Balance Shrer December 31, 20XW 20XV $ 1.00 7,000 Markalle serurities secevable 100 256,600 00 694,500 162.000 *5.100 281.900 $24.700 7.000 161.800 3.30,000 300 721,300 172.900 28.200 9925.400 5 11.500 7.000 297.300 289.900 5.500 611.200 18.20 30.600 $826,100 Totalcentes Netplant and equipment Goodwill Total assets Liabilities and Shareholders' Equity Accounts puble Bank loan Lectued expenses Total current liabilities Long-term debt Total abilities Common stock Retained earnings Total shareholders equity Total abilities and shareholders equity. $115.900 251.000 3.700 103.600 225.800 629.000 14,000 23.500 252.500 S881.900 $196,700 202,000 23.700 422.400 181.600 604.000 14.000 307.400 321.00 S925.400 $209.700 169,000 14.400 393.100 141.000 534,100 14.000 278,000 292.000 $825.100 5.896 8.1% 20.35 6.3x 58.3 days Selected Industry Ratios Profit margin Return on assets investment). Return on equity... Receivables turnover... Average collection period. Inventory turne... Capital street Curretrato 1.5 Quick ratio Det totale Timised 11 Selected industry ratios Profit margin... . Return on assets (investment)......... Return on equity ..... Receivables turnover ....... Average collection period. Inventory turnover... Capital asset turnover ....... Current ratio. Total asset turnover ....... Quick ratio ........... Debt to total assets.... Times interest earned .. 5.8% 8.1% 20.3% 6.3x 58.3 days 4.3x 8.OX 1.6 1.7 1.1 60% 4.3x 37. You are the manager of a credit department. The sales team has presented a large order from a new purchaser, Wizard Industries. For approximately 12 years, Wizard has been installing security and water sprinkler systems in office buildings. The salespeople have been well trained, as they have also presented you with the following financial statements and industry ratios (from your files). In their report they note that sales have increased in the last two years due to Wizard's more aggressive selling approach. The sales team is eager for you to grant credit to Wizard Industries. Of course, you must do a complete analysis noting any ratios that are cause for concern or require a further explanation. What is your recommendation? Do you grant credit? WIZARD INDUSTRIES Income Statements Year ended 2013 $1,54230 1.174804 2015 2014 $1,605,100 $1,841,300 $13 Sales (all on credit) . 1 258,900 1,397400 1.17 Cost of goods sold 346,200 443,900 Gross proft..... 265,650 256,850 Selling and administrative expense... 14,000 14,400 Amortization 66,550 172,650 Operating profit... 65,100 50,550 Interest expense... Earnings before taxes... 1.450 122.100 Taxes 350 27.100 Earnings available to common shareholders $ 1.100 $ 95,000 $ Dividends declared.................... $ 70,000 $ 65,000 $ 357906 294 200 16.00 57.700 50.709 7.600 2.200 $ 5.400 65,000 $ 60,000 WIZARD INDUSTRIES Balance Sheet December 31. 2015 2014 2013 Assets Cash.. Marketable securities....... Accounts receivable. Inventory.... . Prepaid expenses. Total current assets.... Net plant and equipment..... Goodwill. Total assets... Liabilities and Shareholders' Equity Accounts payable.. Bank loan ........... Accrued expenses..... Total current liabilities. ... Long-term debt.......... Total liabilities........... Common stock Retained earnings.............. Total shareholders' equity....... $ 14,900 7.000 410,800 256,600 5.200 694,500 162,000 25.400 $881.900 $ 24.700 7.000 361,800 330,000 800 724,300 172.900 28,200 $925,400 $ 11,500 7.000 297.300 289.900 5,500 611.200 184,300 30,600 $826,100 $145,900 254,000 3.700 403,600 225,800 629,400 14.000 238,500 252,500 $881.900 $196,700 202,000 23.700 422.400 181,600 604.000 14.000 307,400 321,400 $925,400 $209,700 169.000 14.400 393,100 141.000 534 100 14.000 278.000 292.000 $826.100 Total abilities and shareholders' equity