Using the following financial statement data, calculate the following ratios for 2009: Return on equity, current ratio, leverage ratio, times interest earned, average collection period, inventory turnover ratio, return on sales, market to book:
| Snapit company |
|
|
| Income statment (2009) |
|
|
| sales |
$4,000,000 |
|
| Costs of goods sold |
$3,040,000 |
|
| Gross profit |
960,000 |
|
| Selling and admin. expenses |
430,000 |
|
| operating profit |
530,000 |
|
| interest expense |
160,000 |
|
| incomes before tax |
370,000 |
|
| tax expense |
148,000 |
|
| Net income |
222,000 |
|
|
|
|
| Balance Sheet |
2009 |
2008 |
| Cash |
$60,000 |
$50,000 |
| Accounts recievable |
550,000 |
500,000 |
| inventory |
690,000 |
620,000 |
| total current assets |
1,300,000 |
1,170,000 |
| Fixed assets |
1,300,000 |
1,230,000 |
| Total Assets |
2,600,000 |
2,400,000 |
|
|
|
| Accounts payable |
270,000 |
250,000 |
| Bank loan |
580,000 |
500,000 |
| total current liabilities |
850,000 |
750,000 |
| bonds payable |
900,000 |
1,000,000 |
| total liabilities |
1,750,000 |
1,750,000 |
| Common stock (25,000 shares) |
250,000 |
250,000 |
| Retained earnings |
600,000 |
400,000 |
| total liabilities and equity |
2,600,000 |
2,400,000 |
|
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|
|
Note: The common shares are trading in the stock market for $100 each
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Based on your ratio analysis, if snapit company is an ice-cream store, as an investor would you be concerned over their inventory turnover or collection period ratios?
What if Snapit Company was an automobile company? how would you react to their inventory turnover or collection period ratios?