Question

(CMA Adapted) 0-25 Consecutive five-year balance sheets and income statements of Anne Gibson Corpo- ration follow: 2007 $ 43,000 3,000 ANNE GIBSON CORPORATION Balance Sheet December 31, 2007 through December 31, 2011 (Dollars in thousands) 2011 2010 2009 2008 Assets: Current assets Cash $ 47,200 $ 46,000 $ 45,000 $ 44,000 Marketable securities 2,000 2,500 3,000 3,000 Accounts receivable, less allowance of $1,000, December 31, 2011; $900, December 31, 2010; $900, December 31, 2009; $800, December 31, 2008; $1,200, December 31, 2007 131,000 128.000 127,000 126,000 Inventories 122,000 124,000 126,000 127,000 Prepaid expenses 3,000 2,500 2,000 1,000 Total current assets 305,200 303,000 303,000 301,000 Property, plant and equipment, net 240.000 239,000 238,000 237,500 Other assets 10,000 8.000 7.000 6,500 Total assets $555,200 $550,000 $548,000 $545,000 Liabilities and stockholders' equity: Current liabilities Accounts payable $ 72,000 $ 73,000 $ 75,000 $ 76,000 Accrued compensation 26,000 25,000 25,500 26,000 Income taxes 11,500 12,000 13,000 12,500 Total current liabilities 109,500 110,000 113,500 114,500 Long-term debt 68.000 60.000 58.000 60,000 Deferred income taxes 25,000 24,000 23,000 22,000 Stockholders' equity 352.700 356,000 353,500 348,500 Total liabilities and stockholders' $555,200 $550,000 $548,000 $545,000 equity 125.000 125.000 1,000 297,000 234.000 7,000 $538.000 S 78,500 26,000 11.000 115,500 62.000 21.000 339,500 $538,000 ANNE GIBSON CORPORATION Statement of Earnings For Years Ended December 31, 2007-2011 2011 (In thousands, except per share) 2010 2009 Net sales S880,000 $910,000 $840,000 Cost of goods sold 740,000 760,000 704,000 Gross profit 140,000 150,000 136,000 53.000 52.000 Selling and administrative expense 50,000 6,700 5,900 5,800 Interest expense Earnings from continuing operations 80,300 92,100 80,200 before income taxes 26,000 27,500 28.000 Income taxes $ 54,300 S 64,600 S 52,200 Net earnings $ 1.40 5 1.65 Earnings per share $ 1.38 $825,000 695,000 130,000 49,800 5,900 2007 $820,000 692,000 128.000 49.000 6,000 74,300 23,000 $ 51,300 S 1.36 73.000 22.500 S 50,500 $ 1.33 continued

Answer 1

Particulars 2008 2007 2010 2009 2011 Accounts receivable turnover (in times) Net credit sales/Closing accounts receivable 6.61 6.55 6.56 6.72 7.11 Accounts receivable turnover in days 365/Accounts receivable turnover ratio 51.34 55.18 55.75 55.64 54.34 Days' sales in receivables 55.64 Same as accounts receivable turnover in days 51.34 55.18 55.75 54.34 Cost of goods sold/Closing inventory 365/Inventory turnover ratio Same as inventory turnover in days 5.47 5.54 Inventory turnover 6.07 6.13 5.59 Inventory turnover in days Days' sale in inventory 60.18 65.33 66.70 65.93 59.55 60.18 59.55 65.33 66.70 65.93 Days' inventories outstanding+ Days' sales outstanding 110.89 Operating cycle (in days) 114.51 120.51 122.44 121.57 Current assets/Current liabilities 2.79 2.75 2.67 2.57 Current ratio 2.63 3,05,200 3,03,000 Current assets 3,03,000 3,01,000 2.97,000 1,09,500 1,10,000 Current liabilities 1,13,500 1,14,500 1,15,500 Quick assets/Current liabilities 1.65 Acid-test ratio 1.60 1.54 1.51 1.48 Quick assets 1,80,200 1,76,500 1,75,000 1,73,000 1,71,000 Current liabilities 1,09,500 1,10,000 1,13,500 1,14,500 1,15,500 (Cash + Marketable securities)/Current liabilities Cash ratio 0.45 0.44 0.42 0.41 0.40 Cash + Marketable securities 49,200 48,500 48,000 47,000 46,000 Current liabilities 1,09,500 1,10,000 1,13,500 1,14,500 1,15,500

Sales to working capital Net sales/Net working capital 4.42 4.52 4.43 4.50 4.72 Working capital (Current assets- Current liabilities) 1,86,500 1,81,500 1,89,500 1,95,700 1,93,000 8,20,000 9,10,000 8,40,000 8,25,000 8,80,000 Sales Similarly, average balance sheet values can be considered to calculate the same ratios. ANALYSIS The short-term liquidity position of the company looks good and sound due to better favourable current, quick and cash ratio.