Question

The financial statements for Lake of Egypt Marina is provided: Lake of Egypt Marina, Inc. Balance Sheet as of December 31, 2007 and 2008 (in millions of dollars) 2007 2008 Liabilities & Equity Assets 2007 2008 Current assets: Cash and marketable securities Accounts receivable Inventory Total $ 65 $ 75 110 115 190 200 $365 $ 390 Current liabilities Accrued wages and taxes Accounts payable Notes payable Total $ 43 $ 40 80 90 70 80 $ 193 $ 210 Long-term debt: $ 280 $ 300 $ 471 $ 580 100 110 Fixed assets: Gross plant and equipment Less: Depreciation Net plant and equipment Other long-term assets Total $ 371 $ 470 49 50 $ 420 $ 520 Stockholders' equity: Preferred stock (5 million shares) $ 5 $ 5 Common stock and paid-in surplus 65 65 (65 million shares) Retained earnings 242_330 Total $ 312 S 400 Total liabilities and equity $ 785 $ 910 Total assets $ 785 S 910

Answer 1

The answer is attached below

Summary : Lake of Eqypt Marina Inc is not performing well as compare to Industry average. Hence the entity's business under risk

Thanks

1) Current Ratio: v t Formula : Current Ratio = Current Assets Current liabilities Current Cursent Assets liabilities 2008 390 210 Celssent Ratio e 390 210 Current Ratio = 1.85717 2) Quick Ratio Formula : Quick Ratio . Current Assets - Inventory Current Liabèlities po08 Current Assets 390 Less! Invenlory (200) 190 Current liability 210 Quick Ratio - 190 Quick Ratio = 0.8047

s) Joventory Twinoven Ratio Formula Inventory turnover ratio Cost of Average Goods sold inventory - Average opening inventory - inventory inventory 2008 s Cost of Goods sold = 260 I Average inventory = 195 190 +a00. 195 Average inventory = 19 Opening inventor4 = 190 (closing 2007) nventory 200 (2008) s Using formule 260 TIS Inventory turnover Ratio - 1.3333 Conclusion : Higher turnover ratio better is

4) Day's sales in inventory Formula : Ending = Inventory e so X 365 days Cost of Goods sold 2008 Ending inventory = 200 Cost of goods sold = 860 Using formula 5800 x 365 days 260 Day's sales in inventory = 281 days (Rounded off 5) Average collection period Formula: Av. = 365 days o Average Receivable Turnover ratio Average receivable turnover ratio Credit sales opening, t closing receivable receival

2008 515 Credit sales - opening Closing receivable = 110 receivable = 115 (8017 close) (2018) ads E) a (2252) = 3 112.5 Using in formula (Average receivable tusnover ratio) i 118.5 = 4.57.77 Using in main formula ( Average collection period) - 365 days 4-5777 T = 79.7 days Average collection period = 79-7 days

) Average payment period Formula Average account payable (ind Notes) (Total credit purchase/ 365 days) 2008 Average account payable opening payable = 80 C20D7 closing) = - go (+) closing payable (-) Devided for 10 85 Samobor Average account payables Average Notes payable opening payable = 70 OC2007 closing) (+) Closing payable = 80 (2008) ) Device 2008 Average Notes payable=175 so 2 = 270 Total credit purchases Dec (Refer next picture)

Coredit purchases Opening inventosy 3190 Less: Cost of Goods sold (260) Lese: Closing inventory =(Qoo) Total Credit purchase 870 Using in formula - 85775 (270/365 days) = 160 0.7397 = 216. days (Rounded ofB7 7) Total Assets Turnover Ratio : Formula inn e Net Sales Average Total Assets et sales = 2008 515 Average Total Assets Opening (2007 closing) 785

dassmate dassmate a Date Page closing assels un glo. d (2008) 1695 (-) Devided Average total assels = 84-7.5 Using in formula 847.5 Total assets - turnover ratio 0.6077 times) (Rounded off) (8) Debt-to-equity Ratio Formula - Total liabilities Total equity Tel Total 2008 liabilities to Current = 210 Long term debt - 300 Total liability Total equity = 510 = 400

using in formula -Sio 400 Debt to equity Ratio - 1-275 times (9) Profit margin Formula c essaiefst Net Income Net sales 0 Net income Net sales 2008 143 =515 Using in formula: 2. 143 X100 515 (Profit margin = 27:762)

Comparison Ratios Lake of Egypt Marina Industy What ý who average good is (High/low) better » 1.8571 time 2.0 times Higher Current Ratio Inclusta 3) Quick - Ratio 0.9047 time 1-2 times Higher Industan 1. 8333 timu 3.6 times Highes Industry 3) Inventory Turnover salio 4 Day's 281 days 101.39 day Lower Industry Sale in inventory Average 79.7 days 32.5 day lower Industry collection period Average 16 days 45 days Lower Industs payment period 7 Total assaly 0.6073 times 0.85 timu Higher Industry turnover ratio 8) Debt-to 1.275 times 1.67 time Lower Egypt equity Marine

9) Profit Maagin 87.764, 08.75% Highes Industry Conclusion: Based on above analysis Egypt Maring Inc" y not performing as per Industry Average. Hence the risk of going out of business or market is higher.
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