1. Given the balance sheet and income state for Simmons Maintenance Company, compute the ratios that are...
Question:
1. Given the balance sheet and income state for Simmons Maintenance Company, compute the ratios that are also shown for the industry average. The "right answer" refers to the question of whether a particular ratio for Simmons is better or worse than the industry average.
2. Overall are they doing better or worse than the industry? What stands out themost?
SIMMONS MAINTENANCE COMPANY Balance Sheet Assets Cash Accts. Receivable Inventory Liabilities S 15,000 S 21,000 20.000 5.000 46.000 30,000 64.000 Total Assets S140,000 Total Liabilities & Stockholders' Equity S140,000 Accounts Payable 22.000 Notes Payable 30000 Accrued Expenses 67,000 73000 Long-tem Debt Current Assets Current Liabilities Net Fixed Assets Stockholders' Equity Income Statement S120,000 45.000 75.000 Sales (80% credit) Less: Cost of Goods Sold Gross Profit Selling and Administrative Expense20,000 Rent Expense (Lease) EBIT Interest Expense Eamings before taxes Taxes (@ 25%) Net Income 8.000 28.000 47,000 42.000 10.500 S 31,500 Common shares outstanding 15.000 EPS S 2.10 Ratios for Simmons Industry Average Better B) or Worse W Ratio Profit margin Return on assets Return on e Receivables turnover Avg. collection period Inventory turnover Fixed asset turnover Total asset turnover Current ratio Quick ratic Debt to total assets Times interest earned Fixed charge coverage 17.50% 20.80% 35% 4.4x 68.0 days 3.5x 2.4x 76x 1.28 0.85 0.45 12.0x 3.6x quty
Step by Step Answer:
1 Ratios for Simmons Industry Average Better B or Worse W Ratio Profit margin 2625 1750 B Return on assets 2250 2080 B Return on equity 4922 35 B Receivables turnover 436 times 44x W Avg collection pe...View the full answer
Accounting Business Reporting For Decision Making
ISBN: 9780730302414
4th Edition
Authors: Jacqueline Birt, Keryn Chalmers, Albie Brooks, Suzanne Byrne, Judy Oliver
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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