Professional Documents
Culture Documents
(Part One)
Account name
Accounts payable Accounts receivable Accruals Accumulated depreciation Administrative expense Buildings Cash Common stock (at par) Cost of goods sold Depreciation Equipment General expense Interest expense Inventories Land Long-term debts Machinery Marketable securities
(1) Statement
Account name
Notes payable Operating expense Paid-in capital in excess of par Preferred stock Preferred stock dividends Retained earnings Sales revenue Selling expense Taxes Vehicles
(1) Statement
Account name
Accounts payable Accounts receivable Accruals Accumulated depreciation Administrative expense Buildings Cash Common stock (at par) Cost of goods sold Depreciation Equipment General expense Interest expense Inventories Land Long-term debts Machinery Marketable securities
(1) Statement
BS BS BS BS IS BS BS BS IS IS BS IS IS BS BS BS BS BS
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Account name
Notes payable Operating expense Paid-in capital in excess of par Preferred stock Preferred stock dividends Retained earnings Sales revenue Selling expense Taxes Vehicles
(1) Statement
BS IS BS BS I/S BS IS IS IS BS
Item
Account payable Account receivable Accruals Accumulated depreciation Buildings Cash Common stock (at par) Cost of goods sold Depreciation expense Equipment Furniture and fixure General expense Inventories Land Long-term debts Machinery Marketable securities Notes payable
Item
Paid-in capital in excess of par Preferred stock Retained earnings Sales revenue Vehicles
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Earnings before interest, taxes, depreciation and amortization (EBITDA) Less: Depreciation allowance Earnings before interest and taxes = EBIT = operating profits Less: Interest Earnings before tax = EBT = Profits before taxes Less: Taxes Earnings after tax = EAT = NI Less: Preferred stock dividends Earnings available to shareholders
110000 30000
80000 10000
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Cross-sectional ratio analysis Use the following financial statements for Fox Manufacturing Company for the year ended December 31, 2011, along with the industry average ratios also given in what follows, to: a- Prepare and interpret a complete ratio analysis of the firms 2011 operations. b- Summarize your findings and make recommendations. Fox Manufacturing Company Income Statement for the year Ended December 31, 2011
Sales revenue $600,000 Less: Cost of goods sold 460,000 Gross profits $140,000 Less: Operating expenses General and administrative expense $30,000 Depreciation expenses $30,000 Total operating expense 60,000 Operating Profits $ 80,000 Less: Interest expense 10,000 Net profits before taxes $ 70,000 Less: Taxes 27,100 Net profits after taxes (earnings available for common stockholders) $ 42,900 Earnings per share (EPS) $2.15
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Fox Manufacturing Company Balance Sheet December 31, 2011 Assets Cash Marketable Securities Accounts receivable Inventories Total current assets Net fixed assets Total assets $ 15,000 7,200 34,100 82,000 $138,300 $270,000 $408,300
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Accounts payable Notes payable Accruals Total current liabilities Long term debt Stockholders equity Common stock equity (20,000 shares outstanding) Retained earnings Total stockholders equity Total liabilities and stockholdersequity
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Ratio Current ratio Quick ratio Inventory turnover Average collection Period Total asset turnover Debt ratio Times interest earned ratio Gross profit margin Operating profit margin Net profit margin Return on total assets (ROA) Return on common equity (ROE) Earnings per share (EPS)
Industry average, 2011 2.35 0.87 4.55 35.3days 1.09 0.300 12.3 0.202 0.135 0.091 0.099 0.167 $ 3.10
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1. Current Ratio = Current Assets = 138,300 Current Liabilities 75,000 2. Quick Ratio = Current Assets Inventory Current Liabilities II. Activity Ratios: 3. Inventory Turnover
.75
.87
5.61
4.55
4. Average Collection Period = A/R Sales per Day 5. Fixed Assets Turnover =
20.46
35.3
2.2
1.47
1.09
III.
Debt Ratios / Coverage Ratios: 7. Debt Ratio = Total Liabilities Total Assets = Total Debt = 225,000 = Total Assets 408,300 = Total Debt = 225,000 = Stockholders Equity 183,300
.55
.30
8. Debt / Equity
1.23
= T. Debt /T. Assets = .55 1- T. Debt/T. Assets 1 - .55 = .55 = 1.22 .45 9. Times Interest Earned = EBIT Interest = 80,000 10,000 = 8.00 12.3
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F.Co 10. Fixed Payment Coverage = EBIT + Lease Payment Interest + Lease Payment = 80,000 + 0 = 10,000 + 0
Industry
8.00
IV.
Profitability Ratios:
= Gross Profit = 140,000 = Sales 600,000 .233 .202
12. Operating Profit Margin = Operating Profit = EBIT Sales Sales = 80,000 = .133 600,000 13. Net Profit Margin = Net Profit Available to Shareholders Sales = 42,900 = .072 600,000 14. Return on Total Assets = Net Profit Total Assets 15. Return on Equity = = 42,900 = 408,300 .105
.135
.091
.099
.167
16. Earnings per Share = Net Income =42,900 = $ 2.145 No. of Common Shares 20,000 17. Market B.V = PxS BV = $ 15x 20,000 183,300 = 1.64 times
$3.10
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Du Pont Equation
ROE = = = ROA * EM NPM * ATO * EM NPM * ATO * 1 1 Leverage
ROE (FOX Manufacturing) = .105 * 408,300 183,300 = .105 * 2.23 = .234 ROE Industry = .099 * 1.69 = .167
ROEFox = .072*1.47*2.23
= .236 ROE Industry = .091*1.09 *1.69 = .168
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82,000
$138,300
Current Ratio = 138,300 = 1.84 75,000 Quick Ratio = 138,300 82,000 = 56,300 = .75 75,000 75,000
73,050
$138,300
Total C/L
$75,000
Current Ratio = 138,300 = 1.84 75,000 Quick Ratio = 138,300 73,050 = 65,250 = .87 75,000 75,000
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Debt Ratio:
= Total Debt Total Assets = Total Liabilities Total Assets = 225,000 = .55 408,300
Or
Debt / Equity = Debt / Total Assets Debt = Debt / Total Assets 1 - Debt / Total Assets
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Equity Multiplier:
EM = TA Equity TA TA debt 1 1 - Debt TA 1 1 - Leverage
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