1. Using the AgBiz Corporation financial information found on the back of this page, CALCULATE the following financial ratios for Year 1. Answers should include the formula (e.g. Current Assets/Current Liabilities), the numbers used in the calculation (e.g. $17,000/$30,000), and the actual ratio (e.g. 0.57:1).

1. Liquidity ratios

1. Current Ratio
2. Quick Ratio

1. Solvency ratios

1. Debt to Equity Ratio
2. Ownership Ratio

1. Activity (or Efficiency) ratios (for all ratios, specify the number of days to turnover)

1. Inventory turnover (in days)
2. Accounts receivable turnover* (assume 30% of sales were credit purchases)

• Accounts payable turnover* (assume 20% of your purchases were made on credit; use Cost of Goods Sold + Operating Expenses for numerator)

*Assume the payments due to you and from you are due within 30 days.

1. Profitability ratios

1. Return on equity (assume industry standard guideline is 6%) or ROE
2. Return on investment or ROI

• Return on sales or ROS

1. For each of the 10 ratios, use the guideline specified in class to determine whether AgBiz Corporations performance has been satisfactory or unsatisfactory in other words, Good or Bad. Hint: Refer to the Lecture for Calculating Financial Ratios

NOTE: Show ALL formulae and ALL calculations of all 10 ratios.

• Current Ratio

2) Quick Ratio

3) Debt to Equity Ratio

• Ownership Ratio

• Inventory Turnover Ratio

• A/R Turnover Ratio

• A/P Turnover Ratio

• Return on Equity Ratio

• Return on Investment Ratio

• Return on Sales

AgBiz Corporation Balance Sheet at the End of YEAR 1:

Current Assets: $174,000

Cash $ 17,000

Accounts Receivable $ 30,000

Inventory $127,000

Other Assets:

Land $250,000

Buildings $255,000

Equipment $235,000

Other Assets: $740,000

Total Assets: $1,020,000

Current Liabilities: $ 89,950

Accounts Payable $ 53,000

Notes Payable $ 36,950

Long-term Liabilities: $320,050

Notes Payable $220,050

Bonds Payable $100,000

Total Liabilities: $410,000

Owners Equity or Total Net Worth: $610,000

Total Liabilities and Owners Equity: $1,020,000

AgBiz Corporation Income or Profit/Loss Statement for YEAR 1:

Revenues from Sales (Total Sales): $1,465,000

Cost of Goods Sold: $1,129,000

Gross Margin: $ 336,000

Less: Operating Expenses:

Salaries/Wages $ 140,000

Office Expenses $ 8,400

Utilities & Fuel $ 44,600

Promotion $ 92,000

Total Operating Expenses: $285,000

Income Before Taxes (Pre-Tax Income): $ 51,000