Question
I need a help on the * areas. Comprehensive Ratio Analysis The Jimenez Corporation's forecasted 2020 financial statements follow, along with some industry average ratios.
I need a help on the * areas.
Comprehensive Ratio Analysis
The Jimenez Corporation's forecasted 2020 financial statements follow, along with some industry average ratios.
Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2020
| Assets |
|
| Cash | $ 68,000 |
| Accounts receivable | 439,000 |
| Inventories | 898,000 |
| Total current assets | $1,405,000 |
| Fixed assets | 431,000 |
| Total assets | $1,836,000 |
| Liabilities and Equity | |
| Accounts payable | $ 332,000 |
| Notes payable | 120,000 |
| Accruals | 150,000 |
| Total current liabilities | $ 602,000 |
| Long-term debt | 404,450 |
| Common stock | 574,840 |
| Retained earnings | 254,710 |
| Total liabilities and equity | $1,836,000 |
| Jimenez Corporation: Forecasted Income Statement for 2020 | ||
| Sales | $4,290,000 | |
| Cost of goods sold | 3,728,000 | |
| Selling, general, and administrative expenses | 397,456 | |
| Earnings before interest and taxes (EBIT) | $ 164,544 | |
| Interest expense | 30,000 | |
| Earnings before taxes (EBT) | $ 134,544 | |
| Taxes (25%) | 33,636 | |
| Net income | $ 100,908 | |
| Jimenez Corporation: Per Share Data for 2020 |
| |
| EPS | $ 4.39 | |
| Cash dividends per share | $ 0.95 | |
| P/E ratio | 5.0 | |
| Market price (average) | $21.94 | |
| Number of shares outstanding | 23,000 | |
| Industry Ratiosa |
| |
| Quick ratio | 1.0 | |
| Current ratio | 2.7 | |
| Inventory turnoverb | 7.0 | |
| Days sales outstandingc | 32.0 | days |
| Fixed assets turnoverb | 13.0 | |
| Total assets turnoverb | 2.6 | |
| Return on assets | 9.1 | % |
| Return on equity | 18.2 | % |
| Profit margin on sales | 3.5 | % |
| Debt-to-assets ratio | 21.0 | % |
| Liabilities-to-assets ratio | 50.0 | % |
| P/E ratio | 6.0 | |
| Market/Book ratio | 3.5 | |
| Notes: | ||
| aIndustry average ratios have been stable for the past 4 years. | ||
| bBased on year-end balance sheet figures. | ||
| cCalculation is based on a 365-day year. | ||
Calculate Jimenez's 2020 forecasted ratios, compare them with the industry average data, and comment briefly on Jimenez's projected strengths and weaknesses. Assume that there are no changes from the prior period to any of the operating balance sheet accounts. Do not round intermediate calculation. Round your answers to two decimal places.
| Ratios | Firm | Industry | Comment |
| Quick ratio |
| 1.0 | -Select-StrongWeak |
| Current ratio |
| 2.7 | -Select-StrongWeak |
| Inventory turnover |
| 7.0 | -Select-PoorHigh |
| Days sales outstanding | days | 32 days | -Select-PoorHigh |
| Fixed assets turnover |
| 13.0 | -Select-PoorHigh |
| Total assets turnover |
| 2.6 | -Select-PoorHigh |
| Return on assets | % | 9.1% | -Select-BadGood |
| Return on equity | % | 18.2% | -Select-BadGood |
| Profit margin on sales | % | 3.5% | -Select-BadGood |
| Debt-to-assets ratio | % | 21.0% | -Select-LowHigh |
| Liabilities-to-assets ratio | % | 50.0% | -Select-LowHigh |
| P/E ratio |
| 6.0 | -Select-PoorHigh |
| Market/Book ratio |
| 3.5 | -Select-PoorHigh |
So, the firm appears to be badly managed
https://www.chegg.com/homework-help/questions-and-answers/comprehensive-ratio-analysis-jimenez-corporation-s-forecasted-2020-financial-statements-fo-q39878104?trackid=6bc651b3281b&strackid=fdde68682ef8
This is what I used as a reference
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