FINANCIAL ANALYSIS

JERRY SOTO IS THE ACCOUNTANT AND MANAGER OF THE APACHE COMPANIES. GO TO YOU AS A FINANCIAL ANALYST FOR ADVICE ON THE PROPOSAL OF A LOAN. HE IS REQUESTING A LOAN WITH FIVE YEAR TERMS WITH HIS BANK. THE PURPOSE IS TO CANCEL THE PAYMENT (NOTES PAYABLE) OF 2012, AND TO FINANCE CURRENT ASSETS ESPECIALLY THE INVENTORY OF MERCHANDISE. THEREFORE THE FINANCIAL STATEMENTS PRESENTED.

INCOME STATEMENTS: 20X12 20X11

SALES $1,600,000 $1,250,000

COST OF GOODS SOLD 960,000 750,000 GROSS PROFIT $ 640,000 $ 500,000

OPERATING EXPENSES:

FIXED CASH OPERATING EXPENSES $ 210,000 $ 210,000

VARIABLE OPERATING EXPENSES 160,000 125,000

DEPRECIATION 100,000 45,000 TOTAL OPERATING EXPENSES $ 470,000 $ 380,000

EARNINGS BEFORE INTEREST & TAXES $ 170,000 $ 120,000

INTEREST 65,000 30,000

EARNINGS BEFORE TAXES $ 105,000 $ 90,000

TAXES 42,000 36,000 NET INCOME $ 63,000 $ 54,000

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BALANCE SHEETS:

ASSETS 20X12 20X11

CASH $ 50,000 $ 90,000 ACCOUNTS RECEIVABLE 160,000 125,000

MARKETABLE SECURITIES 225,000 100,000

INVENTORIES 255,000 290,000

TOTAL CURRENT ASSETS $ 690,000 $605,000

LAND $ 260,000 $200,000

BUILDING & EQUIPMENT 1,000,000 700,000

LESS: ALLOWANCE FOR DEPRECIATION 380,000 280,000

TOTAL FIXED ASSETS (NET) $ 880,000 $ 620,000

LICENCES $ 500,000 $550,000

TOTAL ASSETS $2,070,000 $ 1,775000

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LIABILITIES

ACCOUNTS PAYABLE $ 290,000 $ 105,000

NOTES PAYABLE 280,000 170,000

MORTGAGE - CURRENT PORTION 60,000 50,000

TOTAL CURRENT LIABILITIES $630,000 $325,000

MORTGAGE DEBT $322,000 $372,000

TOTAL LIABILITIES $952,000 $697,000

STOCKHOLDERS EQUITY

COMMON STOCKS $ 500,000 $500,000

PAID IN CAPITAL 280,000 280,000

RETAINED EARNINGS 338,000 298,000

TOTAL STOCKHOLDERS EQUITY $1,118,000 $1,078,000

TOTAL LIAB. & STOCKHOLDERS EQUITY $2,070,000 $1,775,000

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INDUSTRIES RATIOS: INDUSTRIES AVERAGE

CURRENT RATIO 1.80

ACID TEST RATIO 0.70

AVERAGE COLLECTION PERIOD 30 DAYS

INVENTORY TURN/OVER 2.50 TIME

DEBTS TO TOTAL ASSETS 58%

LONG TERM DEBTS TO TOTAL CAPITALIZATION 33%

TIMES INTEREST EARNED 6.80 TIME

GROSS PROFIT MARGIN 45%

OPERATING PROFIT MARGIN 17%

NET PROFIT MARGIN 7.50%

TOTAL ASSETS TURN/OVER 1.14 TIMES

FIXED ASSETS TURN/OVER 1.40 TIMES

OPERATING EARNINGS RETURN ON INVESTMENT 11.4%

RETURN ON TOTAL ASSETS 4.00%

RETURN ON COMMON EQUITY 9.50%

REQUIRED:

1. FUND STATEMENT ANALYSIS

2. HOW THE OBJECTIVES DESCRIBED ON CHAPTER 1 OF THE TEXT BOOKS WERE ACHIEVED BY EMPRESAS APACHE.