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Problem 1 Financial ratio data is listed below for Crazy A's Horse Trailers. Construct a list of strengths and weaknesses for the firm after analyzing

Problem 1

Financial ratio data is listed below for Crazy A's Horse Trailers. Construct a list of strengths and weaknesses for the firm after analyzing the ratios.

Crazy A's Horse Trailers

Ratios

Ratio

Industry

2016

2015

2014

Current

1.20x

1.18x

1.20x

1.35x

Quick

0.20x

0.18x

0.21x

0.26x

Average Collection Period

4 days

9 days

8 days

6 days

Days Inventory Held

75 days

106 days

99 days

90 days

Fixed Asset Turnover

11.30x

8.84x

8.89x

8.95x

Total Asset Turnover

2.50x

2.20x

2.27x

2.42x

Debt to Equity

3.50x

3.65x

3.17x

2.35x

Times Interest Earned

2.40x

1.72x

2.00x

2.23x

Gross Profit Margin

23.10%

21.21%

22.39%

23.52%

Operating Profit Margin

2.00%

3.05%

2.86%

2.52%

Net Profit Margin

1.10%

0.89%

1.00%

0.97%

Return on Investment

2.75%

1.97%

2.28%

2.35%

Problem 2

Use the following selected financial information for Casco Corporation to compute the ratios we used in class. If information needed to calculate a certain ratio is not given, disregard that ratio. Analysis/comments are not required on this problem.

Casco Corporation

Balance Sheet

December 31, 2016

(in thousands)

Assets Liabilities and stockholders' equity

Current assets Current liabilities

Cash 200 Accounts payable 3,600

Short-term investments 1,000 Accrued liabilities 2,500

Accounts receivable 5,200 Total current liabilities 6,100

Inventory 5,700 Deferred income taxes 2,000

Other current assets 800 Long-term debt 8,200

Total current assets 12,900 Total liabilities 16,300

Long-term assets Stockholders' equity

Net PPE 6,500 Common stock and PIC 11,000

Goodwill 13,000 Retained earnings 5,100

Total stockholders' equity 16,100

Total assets 32,400 Total liabilities and equity 32,400

Casco Corporation

Income Statement

For the Year Ended December 31, 2016

(in thousands)

Net sales $34,500

Cost of goods sold 24,800

Gross profit $ 9,700

Operating expenses 7,400

Operating profit $ 2,300

Interest expense 800

Earnings before taxes $ 1,500

Income tax expense 400

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