Cary Corporations forecasted 2016 financial statements follow, along with industry average ratios. a. Calculate Carys 2016 forecasted

Cary Corporation’s forecasted 2016 financial statements follow, along with industry average ratios.

a. Calculate Cary’s 2016 forecasted ratios, compare them with the industry average data, and comment briefly on Cary’s projected strengths and weaknesses.

b. What do you think would happen to Cary’s ratios if the company initiated cost-cutting measures that allowed it to hold lower levels of inventory and substantially decrease the cost of goods sold? No calculations are necessary. Think about which ratios would be affected by changes in these twoaccounts.

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Cary Corporation: Forecasted Balance Sheet as of December 31. 2016 Cash Accounts receivable Inventories 72,000 Accounts and notes payable S 432,000 439,000 Accruals 894,000 170,000 602,000 404,290 575,000 254,710 Total current abilities Total current assets Land and building Machinery Other fixed assets $1,405,000 Long-term debt 238,000 Common stoclk 132,000 d earnings 61,000 Total assets Cary Corporation: Forecasted Income Statement for 2016 $1,836,000 Total liabilities and equity $1,836,000 $4,290,000 Sales Cost of goods sold Gross operating profit General administrative and selling expenses Depreciation (3,580,000) $710,000 i 236,320) 159,000) 134,000 180,680 72,272) 108,408 Earnings hefore taxes (EBT) Taxes (40%) Net income Number of shares outstanding Per-Share Data EPS Cash dividends per share P/E ratio Market price (average) 23,000 4.71 0.95 5.0x $23.57 Industry Financial Ratios (2016) Quick ratio Current ratio Inventory turnover Days sales outstanding Fixed assets turnover Total assets turnover Return on assets Return on equity Debt ratio Profit margin on sales P/E ratio 1.0x 2.7 5.8x 32 days 13.0x 2.6x 9.1% 18.2% 50.0% 3.5% 6.0x Industry average ratios have heen constant for the past four years Based on year-end balance sheet figures