Financial Assignment
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Balance Sheet as of December 31, 2010
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Gary and Company
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Cash
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$45
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Accounts payables
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$45
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Receivables
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66
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Notes payables
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45
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Inventory
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159
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Other current liabilities
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21
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Marketable securities
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33
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Total current liabilities
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$111
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Total current assets
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$303
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Net fixed assets
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147
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Long Term Liabilities
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Total Assets
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$450
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Long-term debt
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24
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Total Liabilities
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$135
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Owners Equity
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Common stock
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$114
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Retained earnings
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201
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Total stockholders' equity
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315
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Total liabilities and equity
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$450
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Income Statement Year 2010
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Net sales
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$795
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Cost of goods sold
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660
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Gross profit
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135
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Selling expenses
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73.5
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Depreciation
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12
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EBIT
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49.5
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Interest expense
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4.5
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EBT
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45
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Taxes (40%)
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18
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Net income
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27
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1. Calculate the following ratios AND interpret the result against the industry average:
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Ratio
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Your Answer
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Industry Average
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Your Interpretation
(Good-Fair-Low-Poor)
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Profit margin on sales
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3%
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Return on assets
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9%
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Receivable turnover
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16X
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Inventory turnover
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10X
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Fixed asset turnover
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2X
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Total asset turnover
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3X
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Current ratio
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2X
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Quick ratio
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1.5X
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Times interest earned
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7X
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2. Analysis:
Give your interpretation of what the ratios calculations show and how the business can use this information to improve its performance. Justify all answers.