Problem 9-19 Joseph Berio is a loan officer with the First Bank of Tennessee. Red Brick, Inc., a major producer of masonry products, has applied for a short-term loan. Red Brick supplies building material throughout the southern states, with brick plants located in Tennessee, Alabama, Georgia, and Indiana. The firm's income statement and balance sheet are given below. The third table presents both a ratio analysis of Red Brick's previous year's financial statements and the industry averages of the ratios. Red Brick Income Statement (for the period ending December 12/31/20X1) Sales $203,000,000 Cost of goods sold 198,000,000 Administrative expenses 32,000,000 Operating income $-27,000,000 Interest expense 5,000,000 Taxes 300,000 Net income $ -32,300,000 Red Brick Balance Sheet as of 12/31/20X2 Assets Liabilities and Stockholders' Equity Cash $ 800.000 Accounts payable $ 41,000,000 Accounts receivable 36,000,000 Notes payable 12,000,000 Inventory 72,900,000+ Long-term debt 49.000.000 Plant and equipment 125,000,000 Stockholders' equity 132,700,000 $ 234,700,000 $ 234,700,000 20 of sales and credit. Previous year's inventory w $51,000,000 Average Company's Ratios Industry (Previous Year) Current ratio 1.8:1 2.2:1 Quick ratio 0.7:1 0.7:1 Inventory turnover 5.5x 4.6% Average collection period 57 days 52 days Debt ratio (debt/total assets) 32% 41% Times-interest-earned -5.4 3.7 Return on equity -23.9% 14.1% Return on assets -14,1% 10.2% Operating profit margin - 10.2% 15.096 Net profit margin -12.2% 8.8% To help decide whether to grant the loan, compute the following ratios and compare the results with the company's previous year ratios and industry averages. Assume there are 365 days in a year. Do not round intermediate calculations. Round your answers to two decimal places. Current ratio of times is -Select- the industry average and -Select- V the ratio in the previous year. Quick ratio of times is | -Select- the industry average and -Select the ratio in the previous year. Inventory turnover ratio of is -Select the industry average and -Select the ratio in the previous year. Average collection period of days is Select the industry average and -Select the ratio in the previous year. Debt ratio of % is -Select the industry average and -Select the ratio in the previous year. Times-interest-eamed ratio of is -Select V the industry average and -Select the ratio in the previous year. Return on equity ratio of 96 is-Select the industry average and -Select- the ratio in the previous year. Return on assets ratio of % is-Select- the industry average and -Select- the ratio in the previous year. Operating profit margin ratio of % is-Select- the industry average and -Select- the ratio in the previous year. Net profit margin ratio of % is -Select- the industry average and -Select- the ratio in the previous year
