|
Balance Sheet as of December 31, 2010 |
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Gary and Company |
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Cash |
$45 |
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Accounts payables |
$45 |
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Receivables |
66 |
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Notes payables |
45 |
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Inventory |
159 |
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Other current liabilities |
21 |
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Marketable securities |
33 |
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Total current liabilities |
$111 |
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Total current assets |
$303 |
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|
|
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Net fixed assets |
147 |
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Long Term Liabilities |
|
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Total Assets |
$450 |
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Long-term debt |
24 |
|
|
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Total Liabilities |
$135 |
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|
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|
|
|
|
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Owners Equity |
|
|
|
|
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Common stock |
$114 |
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|
|
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Retained earnings |
201 |
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|
|
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Total stockholders’ equity |
315 |
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|
|
|
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Total liabilities and equity |
$450 |
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Income Statement Year 2010 |
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|
|
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Net sales |
$795 |
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Cost of goods sold |
660 |
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Gross profit |
135 |
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Selling expenses |
73.5 |
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Depreciation |
12 |
|
EBIT |
49.5 |
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Interest expense |
4.5 |
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EBT |
45 |
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Taxes (40%) |
18 |
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Net income |
27 |
1. Calculate the following ratios AND interpret the result against the industry average:
|
Ratio |
Your Answer |
Industry Average |
Your Interpretation |
|
Profit margin on sales |
|
3% |
|
|
Return on assets |
|
9% |
|
|
Receivable turnover |
|
16X |
|
|
Inventory turnover |
|
10X |
|
|
Fixed asset turnover |
|
2X |
|
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Total asset turnover |
|
3X |
|
|
Current ratio |
|
2X |
|
|
Quick ratio |
|
1.5X |
|
|
Times interest earned |
|
7X |
|
2. Analysis:
Give your interpretation of what the ratios calculations show and how the business can use this information to improve its performance. Justify all answers.
