w4 9/12

(Financial statement analysis)Carson Electronics' management has long viewed BGT Electronics as an industry leader and uses this firm as a model firm for analyzing its own performance. The balance sheets and income statements for the two firms are found here:

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a.Calculate the following ratios for both Carson and BGT:

Current ratio Times interest earned Inventory turnover Total asset turnover Operating profit margin

Operating return on assets Debt ratio Average collection period Fixed asset turnover Return on equity

b.Analyze the differences you observe between the two firms. Comment on what you view as weaknesses in the performance of Carson as compared to BGT that Carson's management might focus on to improve its operations.

Balance Sheet ($000) Carson Electronics, Inc. BGT Electronics, Inc. Cash $1,990 $1,500 Accounts receivable 4,450 5,960 Inventories 1,450 2,510 Current assets $7,890 $9,970 Net fixed assets 16,030 24,990 Total assets $23,920 $34,960 Accounts payable $2,520 $4,970 Accrued expenses 970 1,450 Short-term notes payable 3,490 1,470 Current liabilities $6,980 $7,890 Long-term debt 7,960 4,010 Owners' equity 8,980 23,060 Total liabilities and owners' equity $23,920 $34,960