Question

Total Tools operates a hardware business. The following Income Statement and related information are available for the financial year ended December 31, 2018 TOTAL TOOLS BALANCE SHEET AGEES 3000 Paranda Naye Nem ert 3120 Acorupa Oruner Total current Long tamo Marie Common stock 30 13.000 Puding Total Redawgs To ochoregut Total Tabs and ដដូវ TOTALIDOLSTEREORMANCE Total Tere Sales (all credit Le Cool Cross pro Selling General Administrative Toleringen Faris before redes ( ET) est charges Irreston bon Total interest charges Farming before tus (ET) Tanes (A ) TOTAL TOGES Other information Dividends poison o n stock Eingsbed in the 00 Shares standing Market price per share Book value persone Eags per share Dividend per share Industry Norm Current ratio Acid-testato Average collection period Accounts recebe umover inventory tumover Operating income tum on investment Gross profit margin Operating profit margin 5 1200 50 138 times Total assets mover 11 Fedemover Dettato 3 Ties resteamed Remonty 5 Price-comings to 6 Enigs per share 67 1757 $450 Required: 1. Calculate each ratio for Total Tools comparative to those listed in the industry norm. (16 marks) 2. Using the ratios calculated above, comment on the performance of Total Tools with respect to its:

Answer 1

1. Current ratio = Current assets / current liabilities = 50,190 / 25,523 = 1.97

2. Acid-test Ratio = (Current assets - Inventory) / Current liab = (50,190-27,530) / 25,523 = 0.89

3. Average collection period = Average accounts receivables / Net Sales * No. of days

= 18,320 / 112,760 * 365 = 59.3 days approx.

4. Accounts receivables turnover = Net Credit Sales / Accounts receivables

= 112,760 / 18,320 = 6.15

5. Inventory Turnover = COGS / average inventory = 85,300 / 27,530 = 3.10

6. ROI = Net operating income(EBIT) / Total assets * 100 = 11,520 / 81,890 *100 = 14.07%

7. Gross profit margin = Gross profit / Net sales * 100 = 27,460 / 112,760 * 100 = 24.35%

8. Operating profit margin = Operating profit / net sales * 100 = 11,520 / 112,760 * 100 = 10.22%

9. Net profit margin = Net income / net sales * 100 = 5,016 / 112,760 * 100 = 4.45%

10. Total assets turnover = Net sales / Total assets = 112,760 / 81,890 = 1.38 times

11. Fixed assets turnover = Net sales / total fixed assets = 112,760 / 31,700 = 3.56 times

12. Debt ratio = Total liabilities / Total assets = 47,523 / 81,890 *100 = 58.03%

13. Times interest earned = EBIT / interest expense = 11,520 / 3,160 = 3.64 times

14. Return on equity = Net Income / shareholders' equity = 5,016 / 34,367 * 100 = 14.60%

15. Price earnings ratio = Market price of share / Earning per share = 20 / 3.86 = 5.18

16. Earning per share = Net income / no. of outstanding shares = 5,016 / 1300 = $3.86

*Second question is not complete.