Requirement: Conduct Ratio Analysis

Joshua & White Technologies: December $31$ Balance Sheets

$($Thousands of Dollars$)$

Assets $20132012$

Cash and cash equivalents $$21,000$ $$20,000$

Short$-$term investments $3,7593,240$

Accounts Receivable $52,50048,000$

Inventories $84,00056,000$

Total current assets $$161,259$ $$127,240$

Net fixed assets $218,400200,000$

Total assets $$379,659$ $$327,240$

Liabilities and equity

Accounts payable $$33,600$ $$32,000$

Accruals $12,60012,000$

Notes payable $19,9296,480$

Total current liabilities $$66,129$ $$50,480$

Long$-$term debt $67,66258,320$

Total liabilities $$133,791$ $$108,800$

Common stock $183,793178,440$

Retained Earnings $62,07540,000$

Total common equity $$245,868$ $$218,440$

Total liabilities and equity $$379,659$ $$327,240$

Joshua & White Technologies December $31$ Income Statements

$($Thousands of Dollars$)$

$20132012$

Sales $$420,000$ $$400,000$

COGS except excluding depr. and amort. $300,000298,000$

Depreciation and Amortization $19,66018,000$

Other operating expenses $27,60022,000$

EBIT $$72,740$ $$62,000$

Interest Expense $5,7404,460$

EBT $$67,000$ $$57,540$

Taxes $(40\%)26,80023,016$

Net Income $$40,200$ $$34,524$

Common dividends $$18,125$ $$17,262$

Addition to retained earnings $$22,075$ $$17,262$

Other Data $20132012$

Year$-$end Stock Price $$90\mathrm{.}00$ $$96\mathrm{.}00$

# of shares $($Thousands$)4,0524,000$

Lease payment $($Thousands of Dollars$)$ $$20,000$ $$20,000$

Sinking fund payment $($Thousands of Dollars$)$ $$5,000$ $$5,000$

Ratio Analysis $20132012$ Industry Avg

Liquidity Ratios

Current Ratio $2\mathrm{.}442\mathrm{.}522\mathrm{.}58$

Quick Ratio $1\mathrm{.}171\mathrm{.}411\mathrm{.}53$

Asset Management Ratios

Inventory Turnover $($Total COGS$/$Inventories$)3\mathrm{.}575\mathrm{.}327\mathrm{.}69$

Days Sales Outstanding $45\mathrm{.}6343\mathrm{.}8047\mathrm{.}45$

Fixed Assets Turnover $1\mathrm{.}922\mathrm{.}002\mathrm{.}04$

Total Assets Turnover $1\mathrm{.}111\mathrm{.}221\mathrm{.}23$

Debt Management Ratios

Debt Ratio $($Total debt$-$to$-$assets$)1782\mathrm{.}2\%1782\mathrm{.}2\%20\mathrm{.}0\%$

Liabilities$-$to$-$assets ratio $3524\mathrm{.}0\%3324\mathrm{.}8\%32\mathrm{.}1\%$

Times$-$interest$-$earned ratio $11\mathrm{.}6712\mathrm{.}9015\mathrm{.}33$

EBITDA coverage ratio $16\mathrm{.}1017\mathrm{.}944\mathrm{.}18$

Profitability Ratios

Profit Margin $957\mathrm{.}14\%863\mathrm{.}10\%8\mathrm{.}86\%$

Basic Earning Power $1915\mathrm{.}93\%1894\mathrm{.}63\%19\mathrm{.}48\%$

Return on Assets $1058\mathrm{.}84\%10\mathrm{.}93\%$

Return on Equity $16\mathrm{.}10\%$

Market Value Ratios

Earnings per share NA

Price$-$to$-$earnings ratio $10\mathrm{.}65$

Cash flow per share NA

Price$-$to$-$cash flow ratio $7\mathrm{.}11$

Book Value per share NA

Market$-$to$-$book ratio $1\mathrm{.}72$

a$.$ Has Joshua & White's liquidity position improved or worsened? Explain.

b$.$ Has Joshua & White's ability to manage its assets improved or worsened? Explain.

Joshua & White's ability to manage its assets has worsened. The total asset turnover is $1\mathrm{.}11$ which is down from $1\mathrm{.}22$ in $2012,$ just $\mathrm{.}01$ below the industry average. This means that the company is generating even less business relative to its peers and using its assets relatively inefficently.

c$.$ How has Joshua & White's profitability changed during the last year?

Profitability has gotten considerably better during the last year. The only aspect not performing as well is their basic earning power due to the inefficent use of their assests

d$.$ Perform Du Pont analysis for Joshua & White for $2012$ and $2013.$

ROE $=$ PM x TA Turnover x Equity Multiplier

$2013$

$2012$