Complete a margin analysis for Associated Industries and answer the questions below. 11. Now that we have determined there might be an operational issue, efficiency ratios should Associated Industries Year Ending Year Ending Change be used to further drill down into the data. Use the Associated Industries Balance sheet and 2016 2017 Profit and Loss to calculate the efficiency ratios and working capital for 2016 and 2017. Gross Margin 43.7% 43.7% 0% (Make sure to label all your answers appropriately.) Operating Margin 3.9% 3.0% (.9%) Net Margin 3.0% 2.4% (.6%) Associated Industries 2016 2017 5. What was the change to the Gross Margins for the period and what does that indicate for Data the operation of the business? Inventory $54,000 $111,500 Answer: Accounts Receivable $132,750 $151,750 6. What was the change to the Operating Margin and what does that indicate for the Accounts Payable $40,500 $77,580 operation of the business? Revenue $375,000 $386,250 Answer: Cost of Goods Sold $211,056 $217,388 Current Assets $227,250 $275,902 7. What was the change to the Net Margin and what does that indicate for the operation of Current Liabilities $40,500 $77,580 the business? Total Assets $270,000 $316,402 Answer: Revenue per Day Cost of Goods Sold Per day 8. Using the net profit amounts from the profit and loss statement for Associated Industries and the select data from the balance sheet in the table below: Efficiency Ratios Calculate return on assets and return on equity for the years 2016 and 2017. Also, calculate Days in Inventory the change. Collection Period Payment Period Cash Conversion Cycle Associated Industries Inventory Turnover Ratio Select Balance Sheet Data Asset Turnover Ratio Year Year 2016 2017 Working Capital Total Assets $270,000 $316,402 Total Equity $94,500 $103,822 12. Is the overall change in efficiency between 2016 and 2017 favorable or unfavorable for the Associated Industries Year Year Change business? Discuss why you came to that conclusion. 2016 2017 Answer: Return on Assets Return on Equity 13. Define what Days in Inventory tells you and use the data you calculated to discuss what has happened to Days in Inventory and how that will affect the business. 9. What happened to Return on Assets and what are the drivers in the change between 2016 Answer: and 2017? Answer: 14. Define what the collection period tells you and use the data you calculated to discuss collection period and how that will affect the business 10. What happened to Return on Equity and what are the drivers in the change between 2016 Answer: and 2017? Answer:Two-week Associated Industries Case- Ratio Analysis Rent $22,500 $22,500 la. Use the following balance sheet and profit and loss statement for Associated Industries to Utilities $11,250 $11,588 Owners' Salary pull the data and answer the questions below the financial statements: $15,750 $15,750 Accounting, Payroll and Legal $7,500 $7,725 Depreciation $2,250 $2,250 Associated Industries Operating Profit $14,694 $11,800 Balance Sheet Change Interest $0 $0 2016 2017 Profit Before Taxes $14,694 $11,800 Assets Income Taxes $3,086 $2,478 Current Assets Net Profit $11,608 $9,322 Cash $40,500 $12,652 Inventory $54,000 $111,500 1b. Create an Indirect Cash flow statement in the table below. Accounts Receivable $132,750 $151,750 Total Current Assets $227,250 $275,902 Associated Industries Plant, Property and Equipment $45,000 $45,000 Cash Flow Statement (indirect method) Less: Accumulated Depreciation ($2,250 ($4,500) Total Plant, Property and Equipment $42,750 $40,500 Beginning cash Total Assets $270,000 $316,402 Net profit Liabilities and Owners' Equity Add depreciation Liabilities Accts receivable (increase)/Decrease Current Liabilities Inventory (increase)/Decrease Accounts Payable $40,500 $77,580 Accounts payable increase/(decrease) Total Current Liabilities $40,500 $77,580 Operating Cash flow Long-Term Liabilities Bank Loan Payable $135,000 $135,000 Asset activity cash flow Total Long-Term Liabilities $135,000 $135,000 Total Liabilities $175,500 $212,580 Financing activity cash flow Owners' Equity Owners' withdrawal Owners' Investment $90,000 $90,000 Bank principal payment Retained Earnings $4,500 $13,822 Total Financing activity cash flow Total Owners' Equity $94,500 $103,822 Ending Cash Total Liabilities and Owners' Equity $270.000 $316,402 2. Explain, what has happened to the overall cash balance in the past year? (Did it Increase or decrease and by how much?) Associated Industries Answer: Profit and Loss Statement 2016 2017 3. What is the major contributors of cash for the year and what does that mean for the Sales Activities operation of the business? Revenue $375,000 $386,250 Cost of Goods Sold Answer: $211,056 $217,388 Gross Profit $163,944 $168,862 Operating Expenses 4. What are the two major reductions for cash and what does that suggest for the operations Selling Expenses of the business? Advertising $15,000 $20,000 Answer: Sales Staff Salary $75,000 $77,250 General and Administrative