Question

Review the financial statements for Jones Inc. and the comparative financial ratios for the year-end review....

Review the financial statements for Jones Inc. and the comparative financial ratios for the year-end review. Enter your calculations and written analysis directly into the template, and show or explain your work where appropriate.

Problem 1. Calculate the firm's 2015 financial ratios for liquidity, activity (asset management), leverage (debt), and profitability.

Problem 2. Analyze the firm's performance from both time-series and cross-sectional points of view using the key financial ratios provided in the template.

Problems 1 and 2
BALANCE SHEET 2015 INSTRUCTIONS: Analyze the firm's performance from both time-series and cross-sectional points of view using the key financial ratios provided.

PROVIDE YOUR WRITTEN ANALYSIS IN THIS COLUMN.
Assets    
Cash and Equivalents $         237,500.00
Accounts Receivable $         592,500.00
Inventory $         607,500.00
Total Current Assets $     1,437,500.00
Gross Fixed Assets $     1,250,000.00
Less Accumulated Depreciation $         187,500.00
Net Fixed Assets $     1,062,000.00
Total Assets $     2,500,000.00
Liabilities and Equity
Current Liabilities
Accounts Payable $         222,500.00
Notes Payable $         422,500.00
Accruals $         217,500.00
Total Current Liabilities $         862,500.00
Long Term Debt $         470,000.00
Total Liabilities $     1,332,500.00
Stockholder's Equity
Common Stock $         637,500.00
Retained Earnings $         530,000.00
Total Stockholders Equity $     1,167,500.00
Total Liabilities & Equity $     2,500,000.00
INCOME STATEMENT
Sales Revenue $     3,360,000.00
Cost of Sales $     2,724,960.00
Gross Profits $         635,040.00
Less: Operating Expenses
Selling Expense $         251,200.00
General S&A $         163,200.00
Depreciation $           48,000.00
Total Operating Expenses $         462,400.00
Total Operating Profit $         172,640.00
Less: Interest Expense $           31,200.00
Net Profits Before Taxes $         141,440.00
Less Taxes (40%) $           56,576.00
Net Profits After Taxes $           84,864.00
LIQUIDITY RATIOS 2013 2014 2015 Industry Average
Current Ratio 1.5 1.7 1.6
Quick Ratio 0.9 1 0.9
Operating Cash Flow n/a n/a
ASSET MANAGEMENT RATIOS 2013 2014 2015 Industry Average
Inventory Turnover 6 5 8.4
Average Collection Period 40 50 40
Fixed Asset Turnover n/a n/a
Total Asset Turnover 1.5 1.5 1.75
DEBT MANAGEMENT RATIOS 2013 2014 2015 Industry Average
Debt Ratio 60% 56% 50%
Times Interest Earned 2.5 3.5 4
PROFITABILITY RATIOS 2013 2014 2015 Industry Average
Gross Profit Margin 20% 19.70% 20%
Operating Profit Margin 4.70% 4.80% 6%
Net Profit Margin 2% 2.30% 3%
Return on Investment 3.00% 3.50% 5.25%
Return on Equity 7.50% 7.95% 10.50%
End of worksheet

Homework Answers

Answer #1
Liquidity Ratio Formula 2015 Notes:
Current ratio: Current assets/Current liabilities= =1437500/1332500=               1.1 Current Ratio here indicates that the firm is have a break even capacity to meets its liabilities. Thus is not supposedly healthy but as compared to industry standards, can be said better.
Quick ratio: (Current assets-Inventory)/Current liabilities= =(1437500-607500)/1332500=               0.6 Working capital is less available as compared to industry standards, The firm should try to release its wc captured in inventory and debtors.
Operating Cash Flow: (EBIT x (1-T)+Depreciation= =(462400*(1-0.40))+48000= $ 325,440 Operating Cash flow refers to a stream of revenue or expense that alters a cash account over a specified time frame. Free cash flow (FCF) is a measure of a business's financial performance. It is calculated as the difference between cash flow and capital expenditures
FREE Cash Flow: Operating Cash flow-Capital expenditure= FCF helps firm determine its return against any change in capital expenditure.
Asset Management Ratios:
Inventory Turnover: Cost of Goods Sold/Inventory= =2724960/607500=               4.5
Receivables Turnover: Sales revenue/Average Accounts receivable= =3360000/592500=               5.7
Average Collection Period: 365/Receivables Turnover= =365/5.7= 64 days
Fixed Asset turnover: Total Sales/Fixed Assets= =3360000/1062000=               3.2
Total Asset Turnover: Total Sales/Assets= =3360000/2500000=               1.3
Debt management ratios:
Debt Ratio: Total Liabilities/Total Assets= =1332500/1437500=               0.9
Time Interest earned: EBIT/Interest Expense= =172640/31200=               5.5
Profitability Ratio:
Gross Profit Margin: Gross Profit/Sales= =635040/3360000= 19%
Operating Profit Margin: Operating profit/Sales= =172640/3360000= 5%
Net Profit margin: Net Profit/Sales= =84864/3360000= 3%
Return on investment: Net Profit/Investments= =84864/(2500000-530000-217500) 5%
Return on Equity: Net Income/Shareholder's Equity= =84864/1167500= 7%
Sustainable Growth rate: ROE x Retention rate= =7% x 40%= 2.8%
where,
Retention Rate= 1 - Dividend pay-out ratio= 1-.60=40%
By looking at the ratios obtained against the industry standards, the company seem to manage its operations at break even costs.
Although in comparison to past 2 years, has managed to sustain its growth.
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Review of Financial Ratios In its closing financial statements for its first year in business, the...
Review of Financial Ratios In its closing financial statements for its first year in business, the Runs and Goses Company, had cash of $242, accounts receivable of $850, inventory of $820, net fixed assets of $3,408, accounts payable of $700, short-term notes payable of $740, long-term liabilities of $1,100, common stock of $1,160, retained earnings of $1,620, net sales of $2,768, cost of goods sold of $1,210, depreciation of $360, interest expense of $160, taxes of $312, addition to retained...
Financial​ ratios: Profitability.  The financial statements for Tyler​ Toys, Inc. are shown in the popup​ window:  ...
Financial​ ratios: Profitability.  The financial statements for Tyler​ Toys, Inc. are shown in the popup​ window:   LOADING.... Calculate the profit​ margin, return on​ assets, and return on equity for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the​ shareholders? Tyler Toys, Inc. Income Statement for Years Ending December 31, 2013 and 2014 2014 2013 Revenue $14,146,613 $13,566,691 Cost of goods sold $-8,448,105...
Financial​ ratios: Financial leverage.  The financial statements for Tyler​ Toys, Inc. are shown in the popup​...
Financial​ ratios: Financial leverage.  The financial statements for Tyler​ Toys, Inc. are shown in the popup​ window:   Calculate the debt​ ratio, times interest earned​ ratio, and cash coverage ratio for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the​ shareholders? Tyler Toys, Inc. Income Statement for Years Ending December 31, 2013 and 2014 2014 2013 Revenue $14,146,494 $13,566,550 Cost of goods sold...
Use the following financial statements for Lake of Egypt Marina, Inc. LAKE OF EGYPT MARINA, INC...
Use the following financial statements for Lake of Egypt Marina, Inc. LAKE OF EGYPT MARINA, INC Balance Sheet as of December 31, 2015 and 2014 (in millions of dollars) 2015 2014 2015 2014   Assets   Liabilities and Equity   Current assets:   Current liabilities:      Cash and marketable securities $ 44 $ 42      Accrued wages and taxes $ 28 $ 30      Accounts receivable 36 36      Accounts payable 32 36      Inventory 153 63      Notes payable 36 42         Total $ 233 $ 141         Total $ 96...
Use the following financial statements for Lake of Egypt Marina, Inc. LAKE OF EGYPT MARINA, INC...
Use the following financial statements for Lake of Egypt Marina, Inc. LAKE OF EGYPT MARINA, INC Balance Sheet as of December 31, 2015 and 2014 (in millions of dollars) 2015 2014 2015 2014   Assets   Liabilities and Equity   Current assets:   Current liabilities:      Cash and marketable securities $ 44 $ 42      Accrued wages and taxes $ 28 $ 30      Accounts receivable 36 36      Accounts payable 32 36      Inventory 153 63      Notes payable 36 42         Total $ 233 $ 141         Total $ 96...
Use the following financial statements for Lake of Egypt Marina, Inc. LAKE OF EGYPT MARINA, INC...
Use the following financial statements for Lake of Egypt Marina, Inc. LAKE OF EGYPT MARINA, INC Balance Sheet as of December 31, 2015 and 2014 (in millions of dollars) 2015       2014           2015       2014 Assets                           Liabilities and Equity                   Current assets:                           Current liabilities:                   Cash and marketable securities   $   45       $   36       Accrued wages and taxes   $  ...
Financial​ ratios: Profitability.  The financial statements for Tyler​ Toys, Inc. are shown in the popup​ window: ...
Financial​ ratios: Profitability.  The financial statements for Tyler​ Toys, Inc. are shown in the popup​ window:  Calculate the profit​ margin, return on​ assets, and return on equity for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the​ shareholders? Tyler Toys, Inc. Income Statement for Years Ending December 31, 2013 and 2014 2014 2013 Revenue $14,146,748 $13,567,954 Cost of goods sold $-8,447,154 $-8,132,993...
Financial? ratios: Liquidity.??The financial statements for Tyler? Toys, Inc. are shown in the table below. Calculate...
Financial? ratios: Liquidity.??The financial statements for Tyler? Toys, Inc. are shown in the table below. Calculate the current? ratio, quick? ratio, and cash ratio for Tyler Toys for 2013 and 2014. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the? shareholders? Tyler Toys, Inc. Income Statement for Years Ending December 31, 2013 and 2014 2014 2013 Revenue $14,146,314 $13,566,585 Cost of goods sold $-8,448,624 $-8,132,222 Selling, general, and...
Financial​ ratios: Liquidity.  The financial statements for Tyler​ Toys, Inc. are shown in the popup​ window:...
Financial​ ratios: Liquidity.  The financial statements for Tyler​ Toys, Inc. are shown in the popup​ window: Calculate the current​ ratio, quick​ ratio, and cash ratio for Tyler Toys for 2013 and 2014. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the​ shareholders? Tyler Toys, Inc. Income Statement for Years Ending December 31, 2013 and 2014 2014 2013 Revenue $14,147,749 $13,567,341 Cost of goods sold $-8,448,332 $-8,131,744 Selling, general,...
Given the financial statements for Jones Corporation and Smith Corporation: JONES CORPORATION Current Assets Liabilities Cash...
Given the financial statements for Jones Corporation and Smith Corporation: JONES CORPORATION Current Assets Liabilities Cash $ 29,400 Accounts payable $ 103,000 Accounts receivable 88,300 Bonds payable (long term) 80,100 Inventory 54,500 Long-Term Assets Stockholders' Equity Gross fixed assets $ 508,000 Common stock $ 150,000 Less: Accumulated depreciation 156,800 Paid-in capital 70,000 Net fixed assets* 351,200 Retained earnings 120,300 Total assets $ 523,400 Total liabilities and equity $ 523,400 Sales (on credit) $ 1,845,000 Cost of goods sold 757,000 Gross...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT