Ratio Analysis

1.Analysis of cost of goods sold problem.

199219931994

Gross Profit Margin60%55%51%

What is happening to cost of goods sold?As was done in the week 2 online lecture on ratio analysis, please assume sales of 1 dollar each year as you do your analysis. You need to show the cost of goods as pennies per dollar of sales.This problem follows the process shown in the online lecture section titled: "Another Income Statement Analytical Approach: Percent of Sales"

2.Overhead (or Sales, General and Administrative Expense) problem.

199219931994

Gross Profit Margin40%39%41%

Operating Margin (NOI/Sales)15%10%5%

What is happening to S,G and A (or overhead expenses)?Please set up an illustration assuming sales of 1.00 dollar each year just as you did in problem number one.You need to show cost of goods and S,G and A (or overhead expenses) as pennies per dollar of sales.

3. Balance Sheet Problem

199219931994

Annual Sales Growth (over prior yr)+ 1%0%+1%

Current Ratio3.5X2X1.2X

Average Collection Period25 days30 days55 days

What is happening to liquidity?What are some follow-up questions your would ask?

4.Using the data provided below, which is the better managed company?Why?Please support your answers by calculating appropriate ratios. You can find the ratios and formulas for these ratios in the week two online lecture on ratio analysis.(10 points)

Company ACompany B

Sales10 million dollars20 million dollars

Net Income1 million dollars2 million dollars

Total Assets10 million dollars15 million dollars