Financial analysis

MTRON ENTERPRISES

MTRON Enterprises is a company specializing in the manufacture of large arcade games and thrill rides, such as roller coasters and ferris wheels. Their customers are businesses such as pool halls, airports, convention centres , tourists sites, amusement parks, etc.

Analyse the financial analysis and answer the following question

1. What are the problems facing by the company?

2. Why ?

3. What would you do next? Be specific.

Measures of liquidity: 1) Working Capital = current assets - current liabilities = $1,718,800 $1,240,00 = $ 1,594,000 2) Current Ratio= current assets/ current liabilities = $1,718,800 / $1,240,00 = 13.854 As per the industry norm for 2015, current ratio = 1.3 3) Quick Ratio=Cash & equivalents only / current liabilities ($1,568,000 + $140,000) / $ 1,240,000 = 12.758 As per the industry norm for 2015, Quick ratio = 0.8 4) Average collection period = Account payable / Avg. daily credit sales Avg. daily credit sales = sales revenue/365 = $450,000/365 = $ 1232.8767 Average collection period = $140,000 / $ 1232.87 = 113.555 = 114 Days As per the industry norm for 2015, average collection period = 35 days 5) Accounts Payment Period = Accounts payable / Avg. daily cost of sales Avg daily cost of sales =COGS/365 = 958.9041096 Avg yment period = 340,000 / 958.90 = 35.45714691 = 35 days As per the industry norm for 2015, average payable period = 35 days 6) Inventory days-on-hand = Inventory / (COGS / 365) 10,000 / (350,000 / 365) = 10.42857262 = 10 days Operating Performances: 1) Inventory turnover =COGS / Inventory $350,000 / $10,000 = 35 As per the industry norm for 2015, inventory turnover = 8 2) Accounts Receivable turnover =Sales / Accounts Receivable = $450,000 / $140,00 = 3.214285714 As per the industry norm for 2015, accounts receivable turnover = 10 3) Accounts Payable turnover = COGS / Accounts Payable $350,000/$34,000 = 10.29411760035 As per the industry norm for 2015, accounts payable turnover = 10 4) Times Interest Earned Ratio = Operating Income / Interest expense = $50,000 / $20,000 = 2.5 As per the industry norm for 2015, Times Interest Earned Ratio = 3 Investment Return: 1) Operating Income Margin = Operating Income / Sales = 50,000/450,000 = 0.111111111 We can consider this as 11% As per the industry norm for 2015, Operating Income margin = 25% 2) Total Asset Turnover =Sales/Total Assets = 450,000/2548000 = 0.176609105 As per the industry norm for 2015, Investment return = 3 3) Return on equity = Net income / Common Equity = 27,000 / 250,000 = 0.108 = 10.80% As per the industry norm for 2015, return on equity = 32%