Question

QUESTION 14 • The Cypress Corporation's Annual Report contained the following information: Balance Sheet as of December 31, 20XX Cash Accounts Receivable Inventories Total Current Assets $72.000 439,000 594.000 $1,405,000 Accounts Payable Other Short-term Payables Total Current Liabilities Long-term Debt Total Liabilities Total Common Equity Total Liabilities & Equity $32,000 70.000 $102.000 900.000 ST.002.000 834.000 $1.836.000 Plant, property, equip Total Assets 231.000 $1.836.000 income Statement for the year ending December 31, 20X Sales Cost of Goods Sold Gross Operating Profit General Adm & Selling Exp Depreciation Misc Expenses Eamings Before Interest and Taxes $ 220,680 Interest Expense Eamings Before Taxes Taxes (40%) Net Income $4,290,000 3.580.000 $ 710,000 236,320 159,000 94.000 40.000 $ 180,680 72.272 108.408 Calculate the following (and show your work!) financial ratios for Cypress, compare them with the industry average data provided and comment if each ratio signifies a strength, weakness or neither for Cypress. (24 points) Ratio Calculation (2 points each) Industry Average Strength, Weakness, or Neither (1 point each) Inventory Turnover 4.00

Answer 1

Inventory turnover ratio = Cost of good sold / Inventory

Cost of good sold is $3,580,000

Inventory =$594,000

Inventory Turnover Ratio = $3,580,000/$594,000= 6.026times

Inventory Turnover Ratio = 6times

It's a Strength for Cypress because higher inventory turnover shows company effectively sell the inventory it buy.

Here, Cypress inventory ratio is more than industry average ratio.