Income Statement

$200620072008$

Net Sales $$1,304,000$ $$1,507,000$ $$1,791,000$

Cost of Goods Sold $781,000952,0001,210,000$

Gross Profit $$523,000$ $$555,000$ $$581,000$

Marketing $135,400149,670220,245$

General Administration $151,000151,200219,560$

Depreciation $35,69549,80560,345$

EBIT $$200,905$ $$204,325$ $$80,850$

Interest $45,00057,00070,000$

EBT $$155,905$ $$147,325$ $$10,850$

Income Tax $(31\%)48,33145,6713,364$

Net Income $$107,574$ $$101,654$ $$7,487$ Balance Sheet

$200620072008$

Cash $$55,000$ $$43,500$ $$11,000$

Accounts Receivable $220,000261,000376,337$

Inventories $388,124437,139545,000$

Prepaid Insurance $25,00028,00028,500$

Total Current Assets $$688,124$ $$769,639$ $$960,837$

Fixed Assets, Net $356,950498,050603,450$

Total Assets $$1,045,074$ $$1,267,689$ $$1,564,287$

Accounts Payable $$127,500$ $$196,500$ $$301,523$

Other Payables $51,00069,86079,499$

Revolving Credit Agreement $61,50051,300130,200$

Current Portion of Long$-$term

Debt $32,50042,80057,850$

Total Current Liabilities $$272,500$ $$360,460$ $$569,072$

Long$-$term Debt $325,000428,000578,500$

Shareholders$$ Equity

Common Shares $360,000360,000360,000$

Retained Earnings $87,574119,22956,715$

Total Liabilities and Equities $$1,045,074$ $$1,267,689$ $$1,564,287$

INDUSTRY AVERAGE RATIOS

Ratio Industry

Average

Current Ratio $2\mathrm{.}5$

Cash Ratio $\mathrm{.}5$

Inventory Turnover in Days $90$ days

A$/$R Turnover in Days $60$ days

A$/$P Turnover in Days $15$ days

Cash Conversion Cycle $135$ days

Fixed Asset Turnover Ratio $4\mathrm{.}01$

Total Asset Turnover Ratio $2\mathrm{.}21$

Long$-$term Debt to Total Capitalization Ratio

$30\%$ Cash Flow Coverage $3\mathrm{.}21$

Effective Interest Rate $8\%$

Gross Profit Margin $45\%$

Operating Profit Margin $25\%$

Net Profit Margin $10\%$

ROA $22\%$

ROE $31\%$ Prepare a two$-$page memorandum. The memo should be divided

into sections describing liquidity, asset management$($compute all related ratios in appendix and discuss above$),$ long$-$term debt$-$paying ability, profitability, and

recommendations for actions.

Include appendices to show your calculations and comparisons. There is no limit to appendices length. Please state any assumptions made.