Review Case 12.21 in your textbook. Share your observations and recommendations for the company based on the data provided.

Case 12.21 (LO 1, 2, 3, 4) Comprehensive Financial Statement Analysis Using Exhibit 12.9 as a guide, compare C&C Sports' performance to the industry averages. What particular observations and recommendations do you have for George Douglas, president of C&C Sports?

Published Industry Ratio Analyses Several sources offer information on ratio analyses of particular industries, most of which are compiled annually. The Risk Management Association publishes its Annual Statement Studies: Financial Ratio Benchmarks. Other pertinent publications include Dun & Bradstreet's Industry Norms and Key Business Ratios and the Almanac of Business and Industrial Financial Ratios, by Leo Troy. These publications provide financial ratios for key industries, as well as condensed common-size balance sheets and income statements. The analyses are divided into several categories based on sales revenue and total assets so that readers can select companies of comparable size.

These publications are organized by industry, as defined by either the Standard Industrial Classification (SIC) code or North American Industry Classification System (NAICS) code. The SIC system was developed in 1939 and 1940 and has been revised several times since then. It assigns a two-digit code to major industry groups and then further identifies specific industries by a four-digit code.1 For example, Major Group 23 is "Apparel and Other Finished Products Made from Fabrics and Similar Materials," and C&C is classified under SIC code 2329 for "Men's and Boys Clothing not Elsewhere Classified."

The NAICS codes, a joint project of the United States, Canada, and Mexico, were first published in 1997. Because this system recognizes changes that have occurred in the global economy since 1940, it provides greater consistency in the classification of firms within industries. As a result, the six-digit NAICS codes are replacing SIC codes in government statistical reporting.2 C&C Sports is classified under industry 315280, "Other Cut and Sew Apparel Manufacturing." Exhibit 12.9 reports selected percentages and statistics drawn on C&C's industry from Dun and Bradstreet's Key Business Ratios and Risk Management Association's Annual Statement Studies: Financial Ratio Benchmarks.

2o 16 2015 2014 2013 Select CommonSize Percentages:l Cash 81 equivalents 11.0% 10.2% 9.6% 7.2% Trade receivables, net Inventory 20.2% 36.4% 21.4% 37.6% 25.7% 36.7% 24.3% 41.0% Property and equipment Shortterm debt 12.5% 149% 13.1% 12.0% 11.9% 13.4% 13.2% 14.3% Trade payables Long-term debt 14.2% 10.9% 15.7% 8.7% 16.8% 6.9% 17.1% 11.8% Stockholders' equity Gross prot 41.3% 38.4% 42.7% 36.6% 42.3% 349% 35.2% 35.2% Operating expenses Operating income 32.3% 6.1% 31.0% 5.6% 29.8% 5.1% 30.9% 4.3% 4.2% 34% Income before taxes Select Ratios: 2017 58% 2016 4.8% 2015 4.3% 2014 3.3% 2013 Current ratio Quick ratio (Acid test) 2.0 0.8 1.9 0.9 2.2 0.8 2.0 0.7 2.0 0.7 Average collection period 36 days Inventory turnover 3.2 times 32 days 3.3 times 36 days 3.6 times 38 days 4.1 times 37 days 3.5 times E" Ch Debttoequity ox Eu 3% Return on assets2 1" Ch 6.2% I" 4:. 6.1% t" M 1" GO 6.9% Return on stockholders' equityg Risk Management Association's 2013/ 2018 Annual Statement Studies: Financial Ratio Benchmarks, NCAIS 315280. 2Based on income before taxes rather than net income. 15.6% 15.0%