Question
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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