Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Textbook Question
Chapter 3, Problem 3.23P
Learning Goal 6
P3-23 Cross-sectional ratio analysis Use the accompanying financial statements for Fox Manufacturing Company for the year ended December 31, 2019, along with the industry average ratios below, to do the following:
- a. Prepare and interpret a complete ratio analysis of the firm’s 2019 operations.
- b. Summarize your findings and make recommendations.
Fox Manufacturing Company Income Statement for the Year Ended December 31 2019
Sales revenue | $600,000 |
Less: Cost of goods sold | 460,000 |
Gross profits | $140,000 |
Less: Operating expenses | |
General and administrative expenses | $ 30,000 |
30,000 | |
Total operating expense | $60,000 |
Operating profits | $80,000 |
Less: Interest expense | 10,000 |
Net profits before taxes | $70,000 |
Less: Taxes | 27,100 |
Net profits after taxes (Hint: Earnings available for common stockholders as there are no preferred stockholders) | $42.900 |
Earnings per share (EPS) | $2.15 |
Ratio | Industry average, 2019 |
Current ratio | 2.35 |
Quick ratio | 0.87 |
Inventory turnover | 4.55 |
Average collection period | 35.8 days |
Total asset turnover | 1.09 |
Debt ratio | 0.300 |
Times interest earned ratio | 12.3 |
Gross profit margin | 0.202 |
Operating profit margin | 0.135 |
Net profit margin | 0.091 |
0.099 | |
0.167 | |
Earnings per share (EPS) | $3.10 |
Based on a 365-day year and on end-of-year figures. |
Fox Manufacturing Company Balance Sheet December 31, 2019
Assets | |
Cash | $ 15,000 |
Marketable securities | 7,200 |
Accounts receivable | 34, 100 |
Inventories | 82,000 |
Total current assets | $138,300 |
Net fixed assets | 270,000 |
Total assets | $408,300 |
Liabilities and |
|
Accounts payable | $ 57,000 |
Notes payable | 13,000 |
Accruals | 5,000 |
Total current liabilities | $ 75,000 |
Long-term debt | $150,000 |
Common stock equity (20,000 shares outstanding) | $110,200 |
73,100 | |
Total stockholders’ equity | $183,300 |
Total liabilities and stockholders’ equity | $408,300 |
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Chapter 3 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
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