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