1. Given the following income statement, balance sheet, historical ratios, industry averages and additional information analyze Majorels overall financial situation.

Income Statement

Majorel

For the Year Ended December 31, 2019

(All figures are in USD)

__________________________________________________________

Sales Revenue 305000

Less: Cost of Goods Sold 105000

Gross Profits 200000

Less: Operating Expenses 55000

Operating Profits 145000

Less: Interest Expense 8450

Net Profits Before Taxes 136550

Less: Taxes (40%) 54620

Net Profits After Taxes 81930

Balance Sheet

Majorel

For the Year Ended December 31, 2019

Assets	$
Cash	90000
Account Receivable	85000
Inventories	68000
Prepaid Expenses	97000
Short Term Investment	55000
Total Current Assets	395000
Gross Fixed Assets	400000
Less Accumulated Depreciation	185000
Net Fixed Assets	215000
Total Assets	610000
Liabilities and Stockholders Equity
Accounts Payable	76000
Notes Payable	69000
Accruals	32000
Interest Payable	15000
Total Current Liabilities	192000
Long Term Debts	105000
Mortgage Payable	40000
Total Long Term Liabilities	145000
Total Liabilities	337000
Common Stock	155000
Retained Earnings	118000
Total Stockholders Equity	273000
Total Liabilities and Stockholders Equity	610000

Ratios	Majorel 2018	Industry Average 2019
Quick Ratio	1.75	1.55
Inventory Turnover	1.67	1.29
Average Collection Period	110 Days	57 Days
Debt Ratio	58%	51%
Times Interest Earned	11.67	18.50
Operating Profit Margin	31.50%	46.75
Return on Equity	25.60%	33.75%
P/E Ratio	4.88	6.75
ROA	12%	5.75%
Current Ratio	1.14	1.25
Net Profit Margin	7.25%	11.16%

Additional Information:

• Depreciation expense of Majorel was $7000 in 2018 and $9000 in 2019.
• Net fixed assets and current assets were $220000 and $205000 respectively in 2018.
• Accruals increased by $6000 in 2019 and Accounts payable decreased by $2000 in 2019.
• Market price of Majorels stock is $32 and number of common stock outstanding is 19750 in 2019.

Required:

1. To measure the efficiency, which ratios must be calculated from the list given above? Calculate and Interpret Majorels ratio in 2019 and Compare ratios from cross-sectional view point. (5)
2. Calculate Majorels Total Asset Turnover in 2018 by using Du-Pont Equation. (1)
3. Calculate Majorels EPS in 2019. (1)
4. Calculate the firms operating cash flow (OCF) and free cash flow (FCF) for the year ended December 31, 2019. (4)