Part 1: Worth 40 points

ADLER COMPANY

Income Statement

For the Period Ending December 31, 2020

NSA 200,000

CGS (170,000)

GPFT 30,000

OPE (25,000)

NPFT 5,000

NSA = Net Sales; CGS = Cost of Goods Sold; GPFT= Gross Profit; OPE = Operating Expenses;

NPFT = Net Profit

ADLER COMPANY

Balance Sheet

December 31, 2020

Current Assets:

CAS 10,000

MAS 10,000

ACR 50,000

MSI 100,000

TCA 170,000

Long-Term Assets:

SEQ 200,000

ADR (100,000)

TLA 100,000

TAS 270,000

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CAS = Cash; MAS= Marketable Securities; ACR= Accounts Receivables; MSI=Merchandise Inventory

TCA = Total Current Assets; SEQ= Store Equipment; ADR= Accumulated Depreciation;

TLA= Total Long-Term Assets; TAS= Total Assets

Current Liabilities:

ACPY 40,000

NOPY 50,000

ACES 20,000

TCLS 110,000

LTNP 90,000

TLBS 200,000

Owner's Equity:

CAPT 70,000

TLOE 270,000

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ACPY= Accounts Payable; NOPY= Notes Payable; ACES= Accrued Expenses;

TCLS= Toatl Current Liabilities; LTNP= Long-Term Notes Payable; TLBS= Total Liabilities;

CAPT= Capital; TLOE= Total Liabilities + Owner's Equity

Required: Analyze the above financial statements using the following ratio analysis.

a. Calculate Company Ratios

(1) Current Ratio

(2) Average Collection Period (Jan. 1 ACR 40,000)

(3) Days Inventory Held (Jan. 1 MSI 110,000)

(4) Days Payable (Jan. 1 ACPY 60,000)

(5) Debt Ratio

(6) Gross Profit Margin

(7) Net Profit Margin

(8) Return on Assets (Jan. 1 TAS 300,000)

(9) Return on Equity Jan. 1 CAPT 50,000)

Jan. 1= January 1st

Industry Ratios

(1) Current Ratio 2.2

(2) Average Collection Period 70 days

(3) Days Inventory Held 175 Days

(4) Days Payable 90 Days

(5) Debt Ratio 45%

(6) Gross Profit Margin 20%

(7) Net Profit Margin 10%

(8) Return on Assets 4.5%

(9) Return on Equity 5%

b. Compare the company ratios to industry ratios if favorable or unfavorable.