The Jimenez Corporation's forecasted 2014 financial statements follow, along with some industry average ratios.
Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2014
Assets
Cash.........................................................$ 72,000
Accounts receivable........................................439,000
Inventories...................................................894,000
Total current assets....................................$1,405,000
Fixed assets..................................................431,000
Total assets...............................................$1,836,000
Liabilities and Equity
Accounts payable.........................................$ 332,000
Notes payable................................................100,000
Accruals......................................................170,000
Total current liabilities..................................$ 602,000
Long-term debt.............................................404,290
Common stock..............................................575,000
Retained earnings...........................................254,710
Total liabilities and equity..............................$1,836,000
Jimenez Corporation: Forecasted Income Statement for 2014
Sales...........................................................$4,290,000
Cost of goods sold.............................................3,580,000
Selling, general, and administrative expenses...............370,320
Depreciation and amortization.................................159,000
Earnings before taxes (EBT)................................$ 180,680
Taxes (40%)........................................................72,272
Net income......................................................$ 108,408
Per Share Data
EPS..................................................................$ 4.71
Cash dividends per share..........................................$0.95
P/E ratio.................................................................5.0
Market price (average)............................................$23.57
Number of shares outstanding...................................23,000
Industry Financial Ratios (2013)*
Quick ratio..............................................................1.0
Current ratio............................................................2.7
Inventory turnover**..................................................7.0
Days sales outstanding***....................................32.0 days
Fixed assets turn over**.............................................13.0
Total assets turnover**................................................2.6
Return on assets......................................................9.1%
Return on equity....................................................18.2%
Profit margin on sales................................................3.5%
Debt-to-assets ratio.................................................21.0%
Liabilities-to-assets ratio..........................................50.0%
P/E ratio..................................................................6.0
Price/Cash flow ratio...................................................3.5
Market/Book ratio......................................................3.5
*Industry average ratios have been constant for the past 4 years.
**Based on year-end balance sheet figures.
***Calculation is based on a 365-day year.
Calculate Jimenez's 2014 forecasted ratios, compare them with the industry average data, and comment briefly on Jimenez's projected strengths and weaknesses. Assume that there are no changes from the prior period to any of the operating balance sheet accounts. Round DSO to the nearest whole number. Round the other ratios to one decimal place.

Please calulate Inventory Turnover, Days sales outstanding and Debt Ratio.

Transcribed Image Text:

Ratios Firm Industry Comment Quick ratio 1.0 0.8 Weak Current ratio 2.7 2.3 Weak Inventory turnover 7.0 7.0 8 Poor 32 days Days sales outstanding days Poor Fixed assets turnover 13.0 10 Poor Total assets turnover 2.6 2.3 Poor Return on assets % 9.1% 5.9 Bad Return on equity % 18.2% 13.1 Bad Profit margin on sales % 3.5% 2.5 Bad Debt ratio 21.0% 50 High Liabilities-to-assets 50.0% 54.8 High EPS $4.71 n.a. Stock Price $23.57 n.a. P/E ratio 6.0 5.00 Poor P/CF ratio 3.5 2.0 Poor M/B ratio n.a. 0.65 So, the firm appears to be badly managed.