Question

Use this chart to assist you. Industry averages are shown below for each ratio. Place your calculated ratio for Williams Outdoor Products in the appropriate spot below.

Ratio	Calculation Williams Outdoor Products	Industry Average	Williams’ ratio is better or worse than industry average
Current Ratio		2.55
Quick Ratio		1.00
Accounts Receivable Turnover		10.5
Inventory Turnover		5.61
Asset Turnover		1.48
Profit Margin		.039
Return on Common Stockholders’ Equity		.110

Williams Outdoor Products

Balance Sheet

December 31, 2018 and 2017

		2018	2017
Assets
Current Assets
Cash		$225,000	$175,000
Short Term Investments		250,000	150,000
Accounts Receivable (net)		525,000	425,000
Inventories		960,000	720,000
Prepaid Expenses		40,000	30,000
Total Current Assets		2,000,000	1,500,000
Long-term Investments		275,000	250,000
Property, Plant and equipment (net)		2,243,000	2,093,000
Total Assets		$4,518,000	$3,843,000

Williams Outdoor Products

Balance Sheet

December 31, 2018 and 2017

	2018	2017
Liabilities
Current Liabilities
Accounts Payable	$780,000	$700,000
Wages payable	70,000	50,000
Total Current Liabilities	850,000	750,000
Long-Term Liabilities
Mortgage note payable, 10%, due 2031	820,000	410,000
Bonds payable, 8%, due 2022	800,000	800,000
Total Long-term liabilities	1,620,000	1,210,000
Total liabilities	2,470,000	1,960,000
Stockholders’ Equity
Common Stock, $5	1,000,000	1,000,000
Retained Earnings	1,048,000	883,000
Total Stockholders’ equity	2,048,000	1,883,000
Total liabilities and Stockholders’ Equity	$4,518,000	$3,843,000

Williams Outdoor Products

Income Statement

For the Years Ended December 31, 2018 and 2017

	2018	2017
Sales	$5,600,000	$5,125,000
Sales returns and allowances	150,000	125,000
Net sales	5,450,000	5,000,000
Cost of goods sold	3,706,000	3,400,000
Gross profit	1,744,000	1,600,000
Operating expenses
Selling expenses	708,500	650,000
Administrative expenses	507,500	325,000
Total operating expenses	1,216,000	975,000
Income from operations	528,000	625,000
Other income and (expenses)
Interest income	7,000	5,000
Gain on sale of equipment	0	20,000
Interest expense	(150,000)	(105,000)
Income before income tax	385,000	545,000
Income taxes	115,000	300,000
Net income	$270,000	$245,000
Earnings per share (250,000 Shares)
Net income	$1.35	$1.23

Williams Outdoor Products

Retained Earnings Statement

For the Years Ended December 31, 2018 and 2017

	2018	2017
Retained Earnings, January 1	$883,000	$723,000
Add net income for year	270,000	245,000
	1,153,000	968,000
Deduct Dividends	105,000	85,000
Retained Earnings, December 31	$1,048,000	$883,000

Answer 1

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			William	Industry	better or worse
1. Current Ratio	Total Current Assets/Total Curretn Liabilities	2000000/850000	2.35	2.55	Worse, since the higher the ratio, the more capable the company.
2. Quick Ratio	(Cash+Cash Equivalent - Marketable Securities+Accounts Receivable)/Current Liabilities	(225000+250000+525000)/(850000)	1.18	1	Better
3. Accounts Receivable Turnover	Net Credit Sale/Average Accounts Receivable	5450000/475000	11.47	10.5	Better.A high accounts receivable turnover ratio means that you have a strong credit collection policy and do well collecting cash quickly from accounts.
Average Accounts Receivable	(525000+425000)/2	475000
4. Inventory Turnover	COGS/Average Inventory	3706000/840000	4.41	5.61	Worse.A low turnover implies weak sales and, therefore, excess inventory
Average Inventory	(960000+720000)/2	840000
5. Asset Turnover	Net Sales/Average total assets	5450000/4180500	1.30	1.48	Worse
Average total assets	(4518000+3843000)/2	4180500
6. Profit Margin	Net Income/Net Sales	270000/5450000	0.050	0.039	Better
7. Return on Common Stockholder Equity	(Net Income-Preferred Dividend)/(Average Common Stock equity)	(270000-0)/1965500	0.14	0.11	Better
Average Common Stock equity	(2048000+1883000)/2	1965500