FINANCIAL ANALYSIS

Juan Soto is the accountant and manager of the companies Trame Distribuidora. He hires you as financial analyst and advisor in applying for a loan. The company is applying for a five-year loan at a known bank in the community. The purpose of the loan is to cancel the notes payable of 20012 and to finance current assets, especially the merchandise inventory. The following financial statements are presented.

INCOME STATEMENTS: 20X12 20X11

SALES $ 5,075,000 $4,821,250

COST OF GOODS SOLD 3,704,000 3,518,800 GROSS PROFIT $ 1,371,000 $1,302,450

OPERATING EXPENSES:

FIXED CASH OPERATING EXPENSES $ 650,000 $ 650,000

VARIABLE OPERATING EXPENSES 416,000 395,200

DEPRECIATION 152,000 152,000 TOTAL OPERATING EXPENSES $ 1,218,000 $ 1,197,200

EARNINGS BEFORE INTEREST & TAXES $ 153,000 $ 105,250

INTEREST 93,000 66,000

EARNINGS BEFORE TAXES $ 60,000 $ 39,250

TAXES 24,000 15,700 NET INCOME $ 36,000 $ 23,550

LESS PREFERRED STOCKS DIVIDENDS 3,000 3,550

EARNINGS AVAILABLE FOR

COMMON STOCKHOLDER $ 33,000 $ 20,000

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BALANCE SHEETS:

ASSETS 20X12 20X11

CASH $ 125,000 $124,100

ACCOUNTS RECEIVABLE 805,556 763,900

MARKETABLE SECURITIES 225,000 200,000

INVENTORIES 475,625 563,445

TOTAL CURRENT ASSETS $ 1,631,181 $ 1,651,445

LAND $ 2,493,819 $ 2,187,707

BUILDING & EQUIPMENT 1,800,000 1,400,000

LESS: ALLOWANCE FOR DEPRECIATION 500,000 348,000

TOTAL FIXED ASSETS (NET) $ 3,793,819 $ 3,239,707

TOTAL ASSETS $ 5,425,000 $ 4,891,152

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LIABILITIES

ACCOUNTS PAYABLE $ 230,000 $ 400,500

NOTES PAYABLE 411,000 470,000

MORTGAGE - CURRENT PORTION 75,000 100,902

TOTAL CURRENT LIABILITIES $ 716,000 971,402

MORTGAGE DEBT- LONG TERM $ 1,565,250 $ 796,000

TOTAL LIABILITIES $ 2,281,250 $ 1,767,402

STOCKHOLDERS EQUITY

COMMON STOCKS $ 1,450,000 $ 1, 450,000

PAID IN CAPITAL 693,750 693,750

RETAINED EARNINGS 1,000,000 980,000

TOTAL STOCKHOLDERS

EQUITY $ 3,143,750 $ 3,123,750

TOTAL LIAB. & STOCKHOLDERS

EQUITY $ 5,425,000 $ 4,891,152

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INDUSTRIES RATIOS: INDUSTRIES AVERAGE

CURRENT RATIO 1.50

ACID TEST RATIO 1.20

AVERAGE COLLECTION PERIOD 30 DAYS

INVENTORY TURN/OVER 10.20 TIMES

DEBTS TO TOTAL ASSETS 24.50%

LONG TERM DEBTS TO TOTAL CAPITALIZATION 33%

TIMES INTEREST EARND 2.50 TIME

GROSS PROFIT MARGIN 26%

OPERATING PROFIT MARGIN 17%

NET PROFIT MARGIN 7.50%

TOTAL ASSETS TURN/OVER 2.14 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. RATIO ANALYSIS: EXCELLENCE, GOOD, AVERAGE, POOR, and DEFICIENT (personal appraisal)

2. COMMON SIZE ANALYSIS

A. INCOME STATEMENTS

B. BALANCE SHEETS

3. FUND STATEMENT ANALYSIS

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

5. ANALYZE THE LOAN REQUEST. WOULD YOU GRANT THE LOAN? EXPLAIN.