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Corporate Finance: SciTronics COMPONENT PERCENTAGES INCOME STATEMENT (each item is expressed as a percentage of net sales revenue) During the four-year period ended December 31, 2008, SciTronics’ managed to improve its earnings (from 3% to 6%) thanks to a decrease in operating expenses (from 64% to 59%) and constant cost of goods (30%). SALES GROWTH During the four-year period ended December 31, 2008, SciTronics’ sales grew at a 20.69 % compound rate. There were no acquisition or divestitures. PROFITABILITY 1. SciTronics’ profit as a percentage of sales in 2008 was 5.7%. 2. This represented a 168.7% increase from 3.4% in 2005. 3. SciTronics had a total of $75000 of capital at year-end 2008 and earned, before…show more content…
2. At year-end 2008, SciTronics’ total liabilities were 53% of its total assets, which compares with 34% in 2005. 3. The market value of SciTronics’ equity was $175,000,000 at December 31, 2008. The total debt ratio at market was 32%. 4. SciTronics’ earnings before interest and taxes (operating income) were $26000 in 2008 and its interest charges were $2000. Its times interest earned was 13 times. This represented an improvement from the 2005 level of 10 times. 5. SciTronics owed its suppliers $ 6000 at year-end 2008. This represented 8.11 % of cost of goods sold and was a decrease from 11.63% at year-end 2005. The company appears to be more prompt in paying its suppliers in 2008 than it was in 2005. 6. The financial riskiness of SciTronics increased between 2005 and 2008 as demonstrated by its higher debt-to-equity ratio. However this does not seem to pose a problem for the company as it actually managed to improve its margin of protection for creditors (it is now able to generate $13 in income for each $1 of interest, versus a previous 10 times interest earned). LIQUIDITY 1. SciTronics held $133000 of current assets at year-end 2008 and owed $48000 to creditors, due to be paid within one year. SciTronics’ current ratio was 2.77, a decrease from the ratio of 3.90 at year-end 2005. 2. The quick ratio for SciTronics at year-end 2008 was 2.17, a decrease from the ratio of 2.90 at year-end
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