Problem 15: Compute the financial ratios for Eastnorth Manufacturing's Industry. Using Eastnorth's ratios from Problem 12, graph the firm's and industry as we have done
Problem 15: Compute the financial ratios for Eastnorth Manufacturing's Industry. Using Eastnorth's ratios from Problem 12, graph the firm's and industry as we have done in this chapter. Analyze Eastnorth's performance in comparison to its industry.
The ratios that we discussed in this chapter are ratio analysis of balance sheet and income statement, financial ratio, liquidity ratios, asset management ratios, financial leverage ratios, profitability ratios, and market value ratios. I have listedbelow the Eastnorth firm's ratios from problem 12 to help compare to the industry ratios.The years are incorrect but the data is correct. See scanned copy with written answers below for problem 12.
Any information would be helpful. Thank you!
Industry
2017 2016 2015
Assets
Cash and Marketable $30,000 $25,000 $20,000
securities
Accounts receivable 110,000 90,000 60,000
Inventories 100,000 80,000 80,000
Total current assets 240,000 195,000 160,000
Gross plant and 250,000 220,000 200,000
equipment
Less: accumulated -100,000 -65,000 -50,000
depreciation
Net plant and 150,000 155,000 150,000
equipment
Land 50,000 50,000 50,000
Total fixed assets 200,000 205,000 200,000
Total assets 440,000 400,000 350,000
Liabilities and Equity
Accounts payable $58,000 $50,000 $45,000
Notes payable 50,000 50,000 50,000
Accrued liabilities 0 0 0
Total current liabilities 108,000 100,000 95,000
Long-term debt 32,000 20,000 15,000
Total liabilities 140,000 120,000 110,000
Total stockholder's 300,000 280,000 250,000
equity
Total liabilities and 440,000 400,000 360,000
equity
Year Ended December 31 2017 2016 2015
Net revenue or sales $700,000 $600,000 $540,000
Cost of goods sold 450,000 375,000 338,000
Gross profit 250,000 225,000 202,000
Operating expenses
General and administrative 95,000 95,000 95,000
Selling and marketing 56,000 50,000 45,000
Depreciation 25,000 20,000 15,000
Operating income 74,000 60,000 47,000
Interest 14,000 10,000 7,000
Income before taxes 60,000 50,000 40,000
Income taxes (40%) 24,000 20,000 16,000
Net income 36,000 30,000 24,000
Number of shares 50,000 50,000 50,000
outstanding
Earnings per share 0.72 0.60 0.48
Answer : - 2015 - 2014 22013 1 ) operating profit margin - operating profit / income . Sales 7 4000 60, 00 0 4700 0 700 000 600, 00 0 540 00 0 2 10.57%. 2 10% = 8. 70y. 2) Net Profit margin = Net profit Sales NP maxgin = 36000 30 000 2400 0 70900 0 600 DOO 5401 000 2 5:14 %. 4. 44%. 3 ) Gross perfo't margin 2 Gegross profit Sales Gp margin = 250000 2 5000 20 2 000 700 00 0 600 000 540 000 35: 71% 37.5 % 37. 40%.2 2015 2014 2013 4 ) Return on Equity ( RDE ) = Net Profit ( PAT ) Equity Share Capital RDE 2 3600 0 30 000 24000 218000 200 000 188000 16. 57 15 % 12. 76%. 5) Return on capaital Employee 2 EBIT (ROCE ) ( Total a bets- Current Liebities ) Lycapital Employed. 60000 47000 ROCE - 74000 (500-000- 142000 / 400 000 - 100 000 352000 - 93000 020. 67 7. 20Y. 18.14 % 6) Return an ansets ( RoA ) EBIT 2015 aug . to tal anets 2014 ROA 74000 60 000 560,000 + 400,000 400 000 + 352000 2 2 16. 44% 15 . 95 /3 2014 2013 7 ) fined anet :-turnover anet = Sales fined anet 700 000 600000 540 000 2 250 00 0 6200 Doo 200 000 3 x 22.7K . Debtor / Recivable turnover stature 8 ) Net Credit Sales ( sales - cash ) aug, Debtor 2 Reciviable 700 500 - 25000 7.} (600000 - 20000 ( 540 000 - 16000 100 0 00 80 000 56000 6. 75 x 7. 25 k 9.35 X. Collection period 365 365- 365 - 6. 75 7.25 9.35 = 54 days 51 days 39 days22015 2014 90/3 9 ) creditor / payable turnover ratio = last of goods sold Payable 450 000 375 000 3 38 000 34000 10 00 0 10 000 13 . 23 k 37. 5 k 33 . 8 k . Payment period 865 365 365 13.23 37.5 33. 8 28 days 10days 11 days In this case , collection period is Greater than payment Period which is a negative thing for the company . 10) Inventory turnover ratio = Lost of goods sold aug, inventory 2015 2014 450 000 2 375 00 0 125000 + 100 000 100000 + 80, 000 2 2 4 x 4. 2 k1) Inventory Conversion period = 365 365 4 4. 2 - 92 days 87 days . 12 ) Current ratio ? current anets Current Liabilities 2015 2014 2013 250 00 0 200 000 15 2 00 0 2 142 00 0 93 000 = 1. 76* 1:63k 13) Quick ratio current anets - inventory Current Liabilities ( 250000 - 125000 ) (2200 000 - 100 000 152000 - 80,000 142000 1001 000 93000 = 0 85 X 1 x 0. 774 X2015 2014 2013 14) Cash ratio a cash and marketable-Service Current liabilities 25000 16000 142 000 100 00 0 93 DOO 0. 17 A 0 . 2 x 0.17 k 15 ) Debt / Equity ratio = 140 000 100, 090 71, 000 218 000 1200, 000 1881 000 2 64.201. 50y. 37. 77 % 16) Debt to Capital Employee , Total debt ( Total anet - Cusescent Liability ) 1001 000 2 140 000 7/ 000 (500 000- 142000 (400 000- 100,000 ( 352000 - 83000 39.11% 33 .33 %. 27.41%.2015 2014 2013 17 ) Interest coverage ratio 2 EBIT Total interest Expense 74000 60000 47000 1400 0 101000 5129 %. 6. 7%. 18) price / Earning ratio Share Price Canning per share. 2. 0: 7 2 0. 60 0:48 1 + 38 x 1.67 X 2 . 1 hDECEMBER 31 2015 2014 2013 Long-term debt 140,000 100,000 71,000 Total liabilities $282,000 $200,000 $164,000 Common stock ($1 par, 50,000 shares) $50,000 $50,000 $50,000 Paid-in capital 100,000 100,000 100,000 Retained earnings 68,000 50,000 38,000 Total stockholders' equity 218,000 200,000 188,000 Total liabilities and equity $500,000 $400,000 $352,000 YEARS ENDED DECEMBER 31 2015 2014 2013 Net revenues or sales $700,000 $600,000 $540,000 Cost of goods sold 450,000 375,000 338,000 Gross profit 250,000 225,000 202,000 Operating expenses: General and administrative 95,000 95,000 95,000 Selling and marketing 56,000 50,000 45,000 Depreciation 25,000 20,000 15,000 Operating income 74,000 60,000 47,000 Interest 14,000 10,000 7,000 Income before taxes 60,000 50,000 40,000 Income taxes (40%) 24,000 20,000 16,000 Net income $36,000 $30,000 $24,000 Number of shares outstanding 50,000 50,000 50,000 Earnings per share $0.72 $0.60 $0.4812. Challenge Problem Below are financial statements for Global Manufacturing. After computing the ratios we discussed in this chapter, discuss strong and weak points of Global's performance. DECEMBER 31 2015 2014 2013 ASSETS Cash and marketable securities $25,000 $20,000 $16,000 Accounts receivable 100,000 80,000 56,000 Inventories 125,000 100,000 80,000 Total current assets 250,000 200,000 152,000 Gross plant and equipment 300,000 225,000 200,000 Less: accumulated depreciation -100,000 -75,000 -50,000 Net plant and equipment 200,000 150,000 150,000 Land 50,000 50,000 50,000 Total fixed assets 250,000 200,000 200,000 Total assets $500,000 $400,000 $352,000 LIABILITIES AND EQUITY Accounts payable $78,000 $65,000 $58,000 Notes payable 34,000 10,000 10,000 Accrued liabilities 30,000 25,000 25,000 Total current liabilities 142,000 100,000 93,000
