Question

Occidental Industries Income Statement for the Year Ended December 31, 2019 200,000 106,000 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Selling expense General and administrative expenses Lease expense Depreciation expense Total operating expense Operating profits Less: Interest expense Net profits before taxes Less: Taxes Net profits after taxes 16,000 10,000 1,000 10,000 6,100 4,360

Answer 1

Income statement
sales revenue		200000
cost of goods sold		106000
gross profit		94000
less operating expenses
Selling expenses		16000
General expenses		10000
Lease expenses		1000
depreciation expenses		10000
total operating expenses		37000
operating profit		57000
less interest expense		6100
net profit before taxes		50900
less taxes		4360
net profit after taxes		46540
Ratios
current ratio = total of current assets/total of current liabilities	115000/112000	1.03
Quick ratio = (total of current assets-inventory)/total of current liability	(115000-45500)/112000	0.62
Inventory turnover = cost of goods sold/Inventory	106000/45500	2.33
average collection period =365*accounts receivables/sales	(365*25000)/200000	46
Debt ratio = total of liabilities/total of assets	(112000+22950)/223000	0.61
Times interest earned = operating profit/interest expense	57000/6100	9.34
Gross profit margin = gross profit/sales	94000/200000	47.00%
net profit margin = net profit/sales	46540/200000	23.27%
return on total assets = net profit/total of assets	46540/223000	20.87%
return on common equity = net income/total of shareholders equity	46540/(61500+26550)	52.86%
Market / book value ratio = market value per share/book value per share	35/29.35	1.19
Book value per share = total of equity/no. of shares outstanding	(61500+26550)/3000	29.35
Operating cash flow = net profit+depreciation	46540+10000	56540
	Industry Average	Actual 2018	Actual 2019
current ratio = total of current assets/total of current liabilities	1.8	1.84	1.03	Deteriorated
Quick ratio = (total of current assets-inventory)/total of current liability	0.7	0.78	0.62	Deteriorated
Inventory turnover = cost of goods sold/Inventory	2	2.59	2.33	Deteriorated
average collection period =365*accounts receivables/sales	37.5	36.5	46	Deteriorated
Debt ratio = total of liabilities/total of assets	65%	67%	61%	Improved
Times interest earned = operating profit/interest expense	3.8	4	9.34	Improved
Gross profit margin = gross profit/sales	38%	40%	47.00%	Improved
net profit margin = net profit/sales	3.50%	3.60%	23.27%	Improved
return on total assets = net profit/total of assets	4%	4%	20.87%	Improved
return on common equity = net income/total of shareholders equity	9.50%	8%	52.86%	Improved
Market / book value ratio = market value per share/book value per share	1.1	1%	1.19	Improved
Book value per share = total of equity/no. of shares outstanding			29.35
C-
Liquidity position of the company has deteriorated as its current ratio and quick ratio has declined in comparison to previous year and industry average
Activity ratios of the company has deteriorated as average collection period has increased and inventory turnover ratio has declined in comparison to previous year and industry average.
profitability position of the company has improved over the year and from industry average as its gross profit ratio, net profit ratio, return on equity and return on assets has improved over the period.
Debt ratio of the company has improved as it has declined over the period and times interest earned ratio has improved.
Market ratio of the company has improved over the year and from industry average