Module 1 Problem #1: Financial Analysis
Directions: The Red Dress Press, Inc. is a daily newspaper publishing company, located in Springfield, somewhere in the United States. Business for the company has been fluctuating over the past several years. To get a better handle on the health of the business, the CFO has requested that data for the previous years of 202X and 202Y be compared to each other, as well as to industry averages. Using the financial data provided below, calculate the requested ratios and provide your analysis of the current financial situation at Red Dress Press. Use the functions of Excel for calculating your data to simplify the process. Enter answers into each colored cell.
Red Dress Press, Inc.
December 31 Balance Sheets
(Thousands of Dollars)
Assets			202X	202Y
Cash and cash equivalents		$256,009	$275,000
Short-term investments		2,765	2,599
Accounts Receivable		82,518	74,560
Inventories			36,950	40,500
Total current assets		$378,242	$392,659
Net fixed assets		25,100	28,001
Total assets			$403,342	$420,660
Liabilities and equity
Accounts payable		$28,632	$25,000
Accruals			14,230	14,000
Short term notes payable		35,250	33,260
Total current liabilities		$78,112	$72,260
Long-term debt		145,230	164,000
Total liabilities		$223,342	$236,260
Common stock		126,000	127,500
Retained Earnings		54,000	56,900
Total common equity		$180,000	$184,400
Total liabilities and equity		$403,342	$420,660
Red Dress Press, Inc. Inc.
December 31 Income Statements
(Thousands of Dollars)
			202X	202Y
Sales			$569,400	$589,400
COGS			248,000	259,000
Gross Profit			321,400	330,400
Depreciation and Amortization	23,600	22,450
Other operating expenses		62,000	62,500
Operating Income		259,400	267,900
EBIT			$235,800	$245,450
Interest Expense		6,300	6,000
EBT			$229,500	$239,450
Taxes (40%)			91,800	95,780
Net Income			$137,700	$143,670
Common dividends		$17,950	$18,900
Addition to retained earnings		$16,730	$23,680
Other Data			202X	202Y
Year-end Share/Stock Price		$47.53	$23.80
# of shares (Thousands)		6,250	12,500
Lease payment (Thousands of Dollars)	$30,000	$31,000
Annual Cost of Sales		$100,099	$102,450
Market Value of Equity		$185,200	$185,600
Ratio Analysis		202X	202Y	Industry Avg
Profitability Ratios
Gross Profit Margin				60.1%
Operating Margin				53.7%
EBIT Margin				41.0%
Net Profit Margin				28.9%
Liquidity Ratios
Current Ratio				5.00
Quick Ratio				4.53
Cash Ratio				2.63
Working Capital Ratios
Accounts Receivable Days			59.85
Accounts Payable Days				20.40
Inventory Days (Turnover)				1.95
Leverage Ratios
Debt-to-equity ratio (book)				43.2%
Debt-to-equity ratio (market)			44.1%
Debt -to-capital ratio				13.8%
Equity multiplier (book)				1.8
Valuation Ratios
Earnings per share				NA
Price-to-earnings ratio				N/A
Operating Returns
Asset Turnover				1.05
Return on Equity				27.50%
Return on Assets				15.70%
Perform a Dupont Analysis for Red Dress Press, Inc. for 202X and 202Y
	ROE =	Net Profit Margin	x Asset Turnover x Equity Multiplier (book)
202X
202Y
Analysis:
What does the calculated data tell us about Red Dress Press, Inc.? Provide an analysis that includes comparison to industry averages as well as year to year comparison. Is Red Dress Press, Inc. performing better in 202X compared to 202Y?