Question:
Given the following
financial statements below, historical ratios, and industry averages, calculate West Island Company's
financial ratios for the most recent year. (Assume a 365-day year.) Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis into evaluations of the firm's liquidity, activity, debt, profit- ability, and market.
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Financial Ratios
The term is enough to curl one's hair, conjuring up those complex problems we encountered in high school math that left many of us babbling and frustrated. But when it comes to investing, that need not be the case. In fact, there are ratios that,...
Transcribed Image Text:
West Island Company Income Statement for the Year Ended December 31, 2012 Sales revenue Less: Cost of goods sold US$10,000,000 7,500,000 USS 2,500,000 Gross profits Less: Operating expenses Selling expense General and administrative expenses Lease expense USS300,000 650,000 50,000 200,000 preciation expense Total operating expense Operating profits 1,200,000 USS 1,300,000 200,000 USS 1,100,000 440,000 USS 660,000 50,000 Less: Interest expense Net profits before taxes Less: Taxes (rate = 40%) Net profits after taxes Less: Preferred stock dividends Earnings available for common stockholders Earnings per share (EPS) USS 610,000 3.05 US$ West Island Company Balance Sheet December 31, 2012 Assets Liabilities and Stockholders' Equity Current assets USS 200,000 Accounts payable USS 900,000 Cash Marketable securities Accounts receivable 0,000 Notes payable 800,000 Accruals Total current liabilities USS 1,200,000 Total current assets USS 2,000,000 ong.term debt (includes Gross fixed assets (at cost) US$12,000,000 Preferred stock (25,000 shares, USS 1,000,000 USS2 dividend) Common stock (200,000 shares at assets USS 9,000,000 USS 1,000,000 US$12,000, Paid-in capital in excess of par value Retained earnings r assets 000 USS 7,800,000 Total stockholders' equity Total liabilities and stockholders' USS12,000,000 Historical and Industry Average Ratios for West Iland Comp pany Ratio Actual 2010 1.40 1.00 9.52 Actual 2011 Industry average, 2012 1.85 1.05 8.60 Current ratio Quick ratio Inventory turnover Average collection period Average payment period Total asset turnover Debt ratio Times interest earned ratio Fixed-payment coverage ratio Gross profit margin Operating profit margin Net profit margin Return on total assets (ROA) Return on common equity (ROE) Earnings per share (EPS) Price/earnings (P/E) ratio Market/book (M/B) ratio 1.55 0.92 9.21 45.6 days 59.3 days 36.9 days 61.6 days 35.5 days 46.4 days 0.74 0.30 8.0 0.74 0.20 8.2 4.5 0.30 0.12 0.062 0.045 0.061 0.80 0.20 7.3 0.27 0.12 0.062 0.050 0.067 0.25 0.10 0.053 0.040 0.066 US$1.75 12.0 US$2.20 10.5 US$1.50 11.2 1.20 1.05 1.10