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Financial Analysis As a financial analyst of Avatar Corporation, you are being provided with the company's most recent financial statements as follows: AVATAR CORPORATION BALANCE SHEET AS AT 31 DECEMBER 2009 (RM) Cash Accounts receivable Inventories Land Net buildings & equipment 9,000 16,500 29,000 20,000 65,000 Accounts Payable Notes Payable Long term debt Common stock Retained earnings 22,500 27,000 28,750 31,500 29,750 139,500 TOTAL ASSETS 139,500 TOTAL LIAB. & EQUITY AVATAR CORPORATION INCOME STATEMENT FOR THE YEAR ENDING 31 DECEMBER 2009 (RM) Sales (all credit) Cost of goods sold Gross Profit General & admin. expense Depreciation expenses Operating profit (EBIT) Interest expenses Earnings before taxes Taxes Net Income 130,000 75,000 55,000 33,500 4,500 17,000 3,000 14,000 3,780 10,220 Financial Ratios for the year 2008 Current Ratio Quick ratio Debt ratio Times interest earned Average collection period 0.8 x 0.48 X 50 % 6.5 X Inventory turnover Total asset turnover Gross Profit Margin Net profit margin Return on Assets 1.5 X 0.8 X 42% 10 % 8.5 % 55 days a) Calculate the financial ratios for Avatar Corporation corresponding to the ratios provided for year 2008. (note: Use 360-days for calculation) (12 marks) b) Perform a ratio analysis for the company based on its liquidity, profitability, leverage and efficiency condition. (8 marks) Part I Financial Management and Planning 28