Unit 3 - Case Analysis 1 Question

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York University *

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1043

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Industrial Engineering

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Oct 30, 2023

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docx

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1. You are the manager of a credit department. The sales team has presented a large order from a new purchaser, Wizard Industries. For approximately 12 years, Wizard has been installing security and water sprinkler systems in office buildings. The salespeople have been well trained, as they have also presented you with the following financial statements and industry ratios (from vour files). In their report they note that sales have increased in the last two years due to Wizard’s more aggressive selling approach. The sales team is cager for vou to grant credit to Wizard Industries. Of course, you must do a complete analysis noting any ratios that are cause for concern or require a further explanation. What is yvour recommendation? Do you grant credit? Page 97 WIZARD INDUSTRIES Income Statements Year Ended 20XX 20XW 20XV Sales (all on credit) $1,605,100 $1,841.300 S 1,542,700 Cost of goods sold 1,258,900 1,397,400 1,174,800 Gross profit 346,200 443,900 367,900 Selling and administrative expense 265,650 256,850 294200 Amortization 14.000 14,400 16,000 Operating profit 66,550 172,650 57,700 Interest expense 65,100 50,550 50,100 Earnings before taxes 1,450 122,100 7,600 Taxes 350 27,100 2,200

WIZARD INDUSTRIES Balance Sheet December 31, 20XX 20XW 20XV Assets Cash § 14900 S 24700 § 11,500 Marketable securitics 7,000 7,000 7,000 Accounts receivable 410,800 361,800 297,300 Inventory 256,600 330,000 289,900 Prepaid expenses 5,200 800 5,500 Total current assets 694 500 724,300 611,200 Net plant and equipment 162,000 172,900 184,300 Goodwill 25,400 28,200 30,600 Total assets $881,900 $925400 $826,100 Liabilities and Shareholders’ Equity Accounts payable $145.900 $196,700 $209.700 Bank loan 254,000 202,000 169,000 Accrued expenses 3,700 23,700 14,400 Total current liabilities 403,600 422 400 393.100 Long-term debt 225,800 181,600 141,000 Total liabilitics 629,400 604,000 534,100 Common stock 14,000 14.000 14,000 Retained carnings 238,500 307,400 278,000 Total sharcholders’ equity 252,500 321,400 292000 Total liabilities and sharcholders’ equity $881,900 $925.400 $826.100

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