question archive REQUIRED: Assume that you are Donna Jamison's assistant and that she has asked you to help her prepare a report that evaluates the company's financial condition
REQUIRED: Assume that you are Donna Jamison's assistant and that she has asked you to help her prepare a report that evaluates the company's financial condition
Subject:AccountingPrice: Bought3
REQUIRED: Assume that you are Donna Jamison's assistant and that she has asked you to help her prepare a report that evaluates the company's financial condition. Answer the following questions:
What are computron's inventory turnover, days sales outstanding, fixed assets turnover, and total assets turnover ratios? How does the firm's utilization of assets stack up against that of the industry?
Donna Jamison was recently hired as a financial analyst by Computron Industries, a manufacturer of electronic components. Her first task was to conduct a financial analysis of the firm covering the last two years. To begin, she gathered the following financial statements and other data.
Balance Sheets 2013 2014
Assets
Cash $ 52,000 $ 57,600
Accounts receivable 402,000 351,200
Inventories 836,000 715,200
Total current assets $1,290,000 $1,124,000
Gross fixed assets 527,000 491,000
Less accumulated depreciation 166,200 146,200
Net fixed assets $ 360,800 $ 344,800
Total assets $1,650,800 $1,468,800
Liabilities and Equity
Accounts payable $ 175,200 $ 145,600
Notes payable 225,000 200,000
Accruals 140,000 136,000
Total current liabilities $ 540,200 $ 481,600
Long-term debt 424,612 323,432
Common stock (100,000 shares) 460,000 460,000
Retained earnings 225,988 203,768
Total equity $ 685,988 $ 663,768
Total liabilities and equity $1,650,800 $1,468,800
(continued)
Income Statements 2014 2013
Sales $3,850,000 $3,432,000
Cost of goods sold (3,250,000) (2,864,000)
Other expenses ( 430,300) ( 340,000)
Depreciation ( 20,000) ( 18,900)
Total operating costs $3,700,300 $3,222,900
EBIT $ 149,700 $ 209,100
Interest expense ( 76,000) ( 62,500)
EBT $ 73,700 $ 146,600
Taxes (40%) ( 29,480) ( 58,640)
Net income $ 44,220 $ 87,960
EPS $0.442 $0.880
Statement of Cash Flows (2014)
Operating Activities
Net income $ 44,220
Other additions (sources o f cash)
Depreciation 20,000
Increase in accounts payable 29,600
Increase in accruals 4,000
Subtractions (uses of cash)
Increases in accounts receivable ( 50,800)
Increase in inventories (120,800)
Net cash flow from operations $( 73,780)
Long-Term Investing Activities
Investment in fixed assets $( 36,000)
Financing Activities
Increase in notes payable $ 25,000
Increase in long-term debt 101,180
Payment of cash dividends ( 22,000)
Net cash flow from financing $104,180
Net reduction in cash account $( 5,600)
Cash at beginning of year 57,600
Cash at end of year $ 52,000
(continued)
Other Data 2014 2013
December 31 stock price $6.00 $8.50
Number of shares 100,000 100,000
Dividends per share $ 0.22 $0.22
Lease payments $40,000 $40,000
Industry average data for 2014:
Ratio Industry Average
Current 2.7x
Quick 1.0x
Inventory turnover 6.0x
Days sales outstanding (DSO) 32.0 days
Fixed assets turnover 10.7x
Total assets turnover 2.6x
Debt ratio 50.0%
TIE 2.5x
Fixed charge coverage 2.1x
Net profit margin 3.5%
ROA 9.1 %
ROE 18.2%
Price/earnings 14.2x
Market/book 1.4x
