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Use the 2016 and 2017 annual balance sheets and income statements data to calculate two years' ratios in the Ratios worksheet. (1) Calculate liquidity ratios,

Use the 2016 and 2017 annual balance sheets and income statements data to calculate two years' ratios in the "Ratios" worksheet.

(1) Calculate liquidity ratios, efficiency ratios, leverage ratios, coverage ratios, profitability ratios, and Z-score;

(2) Design the Ratio Analysis Expert System:

We define "Good" if a 2017 financial ratio is better than the 2016 ratio AND the industry average in 2017;

"OK" if a 2017 financial ratio is better than the 2016 ratio OR the industry average in 2017;

"Unacceptable" for all other situations

(3) Compute the economic profit of the company.

(4) Analyze the ratio performance of the company and discuss your findings briefly.

Balance Sheet

Assets

2017

2016

Cash and Equivalents

152.00

137.60

Accounts Receivable

882.00

731.20

Inventory

906.00

815.20

Total Current Assets

1,940.00

1,684.00

Plant & Equipment

657.00

591.00

Accumulated Depreciation

166.20

146.20

Net Fixed Assets

490.80

444.80

Total Assets

2,430.80

2,128.80

Liabilities and Owner's Equity

Accounts Payable

185.20

155.60

Short-term Notes Payable

255.00

230.00

Other Current Liabilities

220.00

216.00

Total Current Liabilities

660.20

601.60

Long-term Debt

524.61

423.43

Total Liabilities

1,184.81

1,025.03

Common Stock

880.00

880.00

Retained Earnings

365.99

223.77

Total Shareholder's Equity

1,245.99

1,103.77

Total Liabilities and Owner's Equity

2,430.80

2,128.80

Income Statement

2017

2016

Sales

5,150.00

4,532.00

Cost of Goods Sold

4,150.00

3,664.00

Gross Profit

1,000.00

868.00

Selling and G&A Expenses

350.30

270.00

Fixed Expenses

110.00

110.00

Depreciation Expense

20.00

18.90

EBIT

519.70

469.10

Interest Expense

79.00

65.50

Earnings Before Taxes

440.70

403.60

Taxes

79.33

72.65

Net Income

361.37

330.95

Notes:

Tax Rate

18%

18%

\

\

Ratio

2017

2016

Industry 2017

Expert Analysis

2017

2016

Liquidity Ratios

Tax rate

18%

18%

Current Ratio

2.70 x

NOPAT

Quick Ratio

1.00 x

Total Operating Capital

Efficieny Ratios

After-tax Cost of Capital

10%

10%

Inentory Turnover

7.00 x

Dollar Cost of Capital

A/R Turnover

10.70 x

Economic Profit

Average Collection Period

33.64 days

Fixed Assets Turnover

11.20 x

Total Asset Turnover

2.60 x

Leverage Ratios

Total Debt Ratio

50.00%

Long-term Debt Ratio

20.00%

LTD to Total Capitalization

28.57%

Debt to Equity

1.41 x

LTD to Equity

40.00%

Coverage Ratios

Times Interest Earned

2.50 x

Cash Coverage Ratio

2.80 x

Profitability Ratios

Gross Profit Margin

17.50%

Operating Profit Margin

6.25%

Net Profit Margin

3.50%

Return on Total Assets

9.10%

Return on Equity

18.20%

Return on Common Equity

18.20%

Du Pont ROE

18.20%

Financial Distress Prediction

Market Value of Equity

1,352,800

1,178,890

Z-score

2.68

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