Question

ACCT B715  Case #3 ratios
Comparative Balance Sheets as of December 31 ($ in 000s)
	2017	2016	2015
Assets
Cash	$100	$450	$400
marketable securities	0	500	300
accounts receivable	1900	1600	1700
inventory	2200	1650	1600
current assets	4200	4200	4000
PPE	6500	3100	2800
Total Assets	$10,700	7,300	6,800
Liabilities and Equity
Accounts payable	$1,350	900	750
other payables	400	350	500
current liabilities	1750	1250	1250
long-term debt	3250	1100	1250
total liabilities	5000	2350	2500
Contributed capital	2200	2200	2200
retained earnings	3500	2750	2100
total equity	5700	4950	4300
Total liabilities and equity	$10,700	7,300	6,800
Comparative Income Statements for Years ending Deccember 31 ($ in 000s)
	2017	2016	2015
Net sales	$12,500	$11,000	$10,500
Cost of goods sold
Materials	3500	2400	1600
Labor	2200	2700	3200
Mf'g costs	2400	2200	2000
total CGS	8100	7300	6800
Gross Profit	4400	3700	3700
Selling expenses	1200	1050	1100
General & administrative exp	1200	1300	1200
Total operating expenses	2400	2350	2300
Net Income	2000	$1,350	$1,400
1. Compute the ratios we talked about in class--do the following for all three years:
current, quick, debt-to-equity, debt-to-assets, ROA and ROE
** net profit margin and gross profit margin as well
2. compute for 2017 and 2016: turnover and days for both A/R and Inventory.
3. Compare growth rate in receivable and inventory with the growth rate in sales.

Answer 1

Requirement 1
	Sr. No.	Ratio		Formulas			YEAR
							2017		2016		2015
	1	Current Ratio		=Current asset/Current Liabilities			=(4200/1750)		=(4200/1250)		=(4000/1250)
							2.4	Times	3.36	Times	3.2	Times
	2	Quick Ratio		=Quick Asset/Quick Liabilities			=(4200-2000)/1750		=(4200-1650)/1250		=(4000-1600)/1250
							1.257143	Times	2.04	Times	1.92	Times
	3	Debt to Equity		=Total Liabilities/Total equity			=5000/5700		=2350/4950		=2500/4300
							0.877193	Times	0.474747	Times	0.581395	Times
	4	Debt to Assets		=Total Debt/Total assets			=5000/10700		=2350/7300		=2500/6800
							0.46729	Times	0.321918	Times	0.367647	Times
	5	ROA		=Net Income/Average Total assets			=2000/(10700+7300)%		=1350/(7300+6800)%
							11.11111	%	9.574468	%
	6	ROE		=Net Income/Shareholder's equity			=2000/5700%		=1350/4950%		=1400/4300%
							35.08772	%	27.27273	%	32.55814	%
	7	Net Profit Margin		=Net Profit/Total Revenue			=2000/12500%		=1350/11000%		=1400/10500%
							16	%	12.27273	%	13.33333	%
	8	Gross Profit Margin		=Gross profit/ Total Revenue			=4400/12500%		=3700/11000%		=3700/10500%
							35.2	%	33.63636	%	35.2381	%
Requirement 2
	1-a	A/R Turnover Ratio		=Net Credit Sales/Average A/R			=12500/(1900+1600)		=11000/(1600+1700)
							3.571429	Times	3.333333	Times
	1-b	Days for A/R		=(Ending A/R / Net Credit Sales) *365			=(1900/12500)*365		=(1600/11000)*365
							55.48	Days	53.09091	Days
	2-a	Inventory Turnover Ratio		=Cost of goods sold/Average Inventory			=8100/(2200+1650)		=(7300/(1650+1600)
							2.103896	Times	2.246154	Times
	2-b	Days for Inventory		=(Ending Inventory/Cost of goods sold)*365			=(2200/8100)*365		=(1650/7300)*365
							99.1358	Days	82.5	Days
Requirement 3
	1	Growth rate in sales					=(12500-11000)/11000%		=(11000-10500)/10500%
							13.63636	%	4.761905	%
	2	Growth rate in Receivable					=(1900-1600)/1600%		=(1600-1700)/1700%
							18.75	%	-5.88235	%
	3	Growth rate in Inventory					=(2200-1650)/1650%		=(1650-1600)/1600%
							33.33333	%	3.125	%