Summary of Company Ratios (2004-2005, Including 2006 Industry Averages) INDUSTRY AVERAGE 2004 2005 2006 RATIO Overall Liquidity Current ratio 2.04 2.08 2.05 Quick (acid-test) ratio 1.32 1.46 1.43 Activity Inventory turnover 5.7 5.7 6.6 Average collection period 43.8DAYS 51.2DAYS 44.3 days Average payment period 75.8 days 81.2 days 66.5 days Total asset turnover 0.94 0.79 0.75 Debt Debt ratio 36.80% 44.30% 40.00% Times interest earned ratio 5.6 3.3 4.3 Fixed-payment coverage ratio 2.4 1.4 1.5 Gross profit margin 31.40% 33.30% 30.00% Operating profit margin 14.60% 11.80% 11.00% Net profit margin 8.20% 5.40% 6.20% Earnings per share (EPS) $3.26 $1.81 $2.26 Return on total assets (ROA) 7.80% 4.20% 4.60% Return on common equity (ROE) 13.70% 8.50% 8.50% Market Price/earnings (P/E) ratio 10 12.5 Market/book (M/B) ratio 1.25 0.85 1.3 10.5 3. Write proper citation and referencing in your report. 4. Write your report in A4 paper and the font is COURIER NEW. Side left margin is 1.25 and the right side margin is 1.0 5. Upload your narrative report to the Moodle. 6. Present your research output within 10-15 minutes. 7. Your Final Project marks will be based on the given rubrics. 8. The group has to write their own project. 9. Maximum similarity index is 20% (Plagiarism Report) COPIED PROJECT will be mark ZERO for all the groups. Case study Learning Objectives The purpose of this case is to help you: Students will possess knowledge of current theory and techniques of the major business discipline. Students will exhibit the leadership capacity and teamwork skills for business decision making. Students will understand the ethical implication of business decision making and recognize ethical dilemmas. Students will demonstrate the ability to communicate effectively. Students will demonstrate critical thinking skills. An experienced budget analyst at Marwin ,Inc., has been charged with assessing the firm's financial performance during 2006 and its financial position at year-end 2006. To complete this assignment, she gathered the firm's 2006 financial statements (below). In addition, She obtained the firm's ratio values for 2004 and 2005, along with the 2006 industry average ratios (also applicable to 2004 and 2005). Salmabad, Kingdom of Bahrain For the years ended December 31 2006 2005 Sales revenue 53,074 $2,567 Less: Cost of goods sold 2,088 1.711 Gross profits $ 986 $ 856 Less: Operating expenses Selling expense $ 100 $ 108 General and administrative expenses 194 187 Lease expenses 35 35 Depreciation expense 239 223 Total operating expense S 568 $ 553 Operating profits $ 418 $ 303 Les: Interest expense 93 91 Net profits before taxes $325 $ 212 Less: Taxes (rate - 29%) 94 Net profits after taxes $ 231 $ 148 Less: Preferred stock dividends 10 10 Earnings available for common stockholders $ 221 $ 138 Earnings per share (EPSY $ 2.90 S 1.81 Dividend per share (DPS) $ 1.29 $ 0.75 Marvin Company Statement of Retained Earnings ($000) for the Year Ended December 31, 2006 79 99 159 114 Salmabad, Kingdom of Bahrain Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 382 $ 270 Notes payable Accruals Total current liabilities $ 620 $ 483 Long-term debe (includes financial leases $1,023 $ 967 Total liabilities $1,643 $1,450 Stockholders' equity Preferred stock-cumulative 5%, 5100 par, 2,000 shares authorized and issued $ 200 $ 200 Common stock-$2.50 par, 100,000 shares authorized, shares issued and outstanding in 2006: 76,262; in 2005: 76,244 191 190 Paid-in capital in excess of par on common stock Retained earnings 1,135 Total stockholders' equity $1,954 $1,820 Total liabilities and stockholders' equity $3,597 $3.270 428 418 1,012 -In 2006, the firm has a 6-year financial lease requiring annual beginning of year payments of $35,000. Four years of the lease have yet to run Annual principal repayments on a portion of the firm's total outstanding debt amount to $71,000. The annual preferred stock dividend would be 55 per share (5% x $100 par), or a total of $10,000 annually ($5 per share x 2,000 shares). Marvin company Income statement is given in $000 Marvin company balance sheet is given in $000) December 31 2006 2005 S 363 68 503 289 $1,223 $ 288 51 365 300 $1,004 Assets Current assets Cash Marketable securities Accounts receivable Inventories > Total current assers Gross fixed assets (at cost" Land and buildings Machinery and equipment Furniture and fixtures Vehicles Other (includes financial leases) Total gross fixed assets (at cost) Less: Accumulated depreciation Net fixed assets Total assets $1,903 1,693 316 314 $2,072 1,866 358 275 98 $4,669 2,295 52,374 $3.597 $4,322 2,056 $2,266 $3.270 > $1,012 231 Retained earnings balance (January 1, 2006) Plus: Net profits after taxes (for 2006) Less: Cash dividends (paid during 2006) Preferred stock Common stock Total dividends paid Retained earnings balance (December 31, 2006) $10 98 108 $1,135 TO DO Q1. Calculate the firm's 2006 financial ratios, and then fill in the preceding table. (Assume a 365-day year.) (13 marks) (1 mark each ratio listed above) Q2. Analyze the firm's current financial position from both a cross-sectional and a time- series viewpoint. Break your analysis into evaluations of the firm's liquidity, activity, debt, profitability, and market. (10 marks) (2 marks each categories ) Q3. Summarize the firm's overall financial position on the basis of your findings in part b(4 marks) Q4. What ethical issues could confront a financial manger? ( 3 marks)