Problem 3-14

Comprehensive Ratio Analysis

The Jimenez Corporation's forecasted 2017 financial statements follow, along with some industry average ratios.

Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2017

Assets Cash $ 72,000

Accounts receivable 439,000

Inventories 894,000

Total current assets $1,405,000 Fixed assets 431,000 Total assets $1,836,000 Liabilities and Equity Accounts payable $ 332,000 Notes payable 100,000 Accruals 170,000 Total current liabilities $ 602,000 Long-term debt 404,290 Common stock 575,000 Retained earnings 254,710 Total liabilities and equity $1,836,000

Jimenez Corporation: Forecasted Income Statement for 2017

Sales $4,290,000 Cost of goods sold 3,580,000 Selling, general, and administrative expenses 370,320 Depreciation and amortization 159,000 Earnings before taxes (EBT) $ 180,680 Taxes (40%) 72,272 Net income $ 108,408

Jimenez Corporation: Per Share Data for 2017

EPS $ 4.71 Cash dividends per share $ 0.95 P/E ratio 5.0 Market price (average) $ 23.57 Number of shares outstanding 23,000

Industry Ratios

Quick ratio 1.0 Current ratio 2.7 Inventory turnover** 7.0 Days sales outstanding*** 32.0 days Fixed assets turn over** 13.0 Total assets turnover** 2.6 Return on assets 9.1% Return on equity 18.2% Profit margin on sales 3.5% Debt-to-assets ratio 21.0% Liabilities-to-assets ratio 50.0% P/E ratio 6.0 Price/Cash flow ratio 3.5 Market/Book ratio 3.5

**Based on year-end balance sheet figures.

***Calculation is based on a 365-day year.

Calculate Jimenez's 2017 forecasted ratios, compare them with the industry average data, and comment briefly on Jimenez's projected strengths and weaknesses. Assume that there are no changes from the prior period to any of the operating balance sheet accounts. Round DSO to the nearest whole number. Round the other ratios to one decimal place.

Quick ratio Current ratio Inventory turnover Days sales outstanding Fixed assets turnover Total assets turnover Return on assets Return on equity Profit margin on sales Debt ratio Liabilities-to-assets EPS Stock Price P/E ratio Price/Cash flow ratio Market/Book ratio So, the firm appears to be badlyv 0.8 2.3 4 37 10 2.3 5.90 13.10 2.53 54.80 54.80 1.0 2.7 7.0 32 days 13.0 2.6 9.1% 18.2% 3.5% 21 .0% 50.0% Weak Weak Poor days Poor Poor Poor Bad Bad Bad High High $4.71 n.a n.a 6.0 3.5 $23.57 5.0 2.0 0.65 Poor Poor n.a managed