Using Ratios to Analyze Several Years of Financial Data
The following information was contained in the annual financial statements of Cone Company, which started business January 1, 2011 (assume account balances only in Cash and Capital Stock on this date: all amounts are in thousands of dollars).
| 2011 | 2012 | 2013 | 2014 |
Accounts receivable (net; terms n/30) | $11 | $12 | $18 | $ 24 |
Merchandise inventory | 12 | 14 | 20 | 30 |
Net sales (3/4 on credit) | 44 | 66 | 80 | 100 |
Cost of goods sold | 28 | 40 | 55 | 62 |
Net income (loss) | (8) | 5 | 12 | 11 |
Required (show computations):
1. Complete the following tabulation
| Items | 2011 | 2012 | 2013 | 2014 |
a. | Profit margin percentage | ||||
b. | Gross profit ratio | ||||
c. | Expenses as percentage of sales, excluding cost of goods sold | ||||
d. | Inventory turnover ratio | ||||
e. | Days supply in inventory | ||||
f. | Receivable turnover ratio | ||||
g. | Ave rage days In collect | ||||
2. Evaluate the results of the related ratios a. b. and c to identify the favorable or unfavorable factors. Give your recommendations to improve the company's operations.
3. Evaluate the results of the last four ratios (d, e, f. and g) and identify any favorable or unfavorable factors. Give your recommendations to improve the company's operations.
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