Key Ratios for ABC, Inc. and Its Industry ABC, Inc. 1994 Ratios Industry Average Ratios in 1994
Question:
Key Ratios for ABC, Inc. and Its Industry ABC, Inc. 1994 Ratios Industry Average Ratios in 1994
Current ratio 1.2 1.4
Acid test ratio 0.89 0.94
Average collection period 30 days 25 days
Inventory turnover 18.1 20.3
Fixed assets turnover 4.1 4.8
Total asset turnover 2.78 2.8
Debt ratio 50% 60%
Times-interest-earned 5.5% 4.5%
Net profit margin 1.15% 1.5%
Return on equity 5.21% 7.32%
ABC, Inc. Income Statement (in thousands)
December 31, 1995
Sales (all credit) $200,000
Cost of goods sold 140,000
Gross profit on sales 60,000
Operating expenses 56,000
Operating income 4,000
Interest expense 1,000
Earnings before tax 3,000
Income tax 1,050
Net income available to common stockholders $1,950
ABC, Inc. Balance Sheet (in thousands) December 31, 1995
Assets Cash $2,000
Accounts receivable 17,800
Inventories 8,700
Total current assets 28,500
Gross fixed assets 70,000
Accumulated depreciation 26,500
cNet fixed assets 43,500
Total assets $72,000
Liabilities and Equity Accounts payable $18,000
Accruals 13,350
Total current liabilities 31,350
Long-term debt 8,250
Total liabilities 39,600
Common stock (par value and paid in capital) 2,000
Retained earnings 30,400
Total stockholders' equity 32,400
Total liabilities and equity $72,000
Required:
a. Calculate the following ratios for ABC Inc. for 1995 -
Average collection period -
Inventory turnover -
Fixed asset turnover -
Current ratio -
Acid test ratio -
Debt to total asset ratio -
Net profit margin
Return on equity
b. Comment on the firms liquidity and profitability, taking into consideration the industry averages.
Expert Answer:
14 094 al Calculations of Formulas Til Average Collection pericol 11 Inventory 17800 x 365 2 ... View the full answer
Statistics for Management and Economics Abbreviated
ISBN: 978-1285869643
10th Edition
Authors: Gerald Keller
