Question: Perform Ratio Analysis for the entity. Compute each ratio under the four key categories ( Gross profitability , Net profitability, Earnings per share , Investment
- Perform Ratio Analysis for the entity. Compute each ratio under the four key categories ( Gross profitability, Net profitability, Earnings per share, Investment turnover , Current ratio , Quick ratio, Debt to equity ratio, Debt ratio, Annual inventory turnover. In addition to computing the ratios under each of the four categories, perform DuPont Analysis as appropriate (i.e. for ROA and ROE).
- 2. Determine a value for the referenced entity using Net Income as a Perpetuity and ROE as the Discount Rate.
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SAXTON COMPANY
Income Statement
For the Year Ended December 31, 2009
Sales (all on credit) $ 4,000,000
Cost of Goods Sold3,000,000
___________
Gross Profit.$ 1,000,000
Selling and Administrative Expenses. 450,000
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Operating Profit $ 550,000
Interest Expense 50,000
Extraordinary Loss. 200,000
Earnings Before Taxes$ 300,000
Income Taxes (33%). 100,000
Net Income.$ 200,000
SAXTON COMPANY
Balance Sheet
As of December 31, 2009
Assets
Cash $ 30,000
Accounts Receivable.. 350,000
Marketable Securities .. 50,000
Inventory. 370,000
____________
Total Current Assets. $ 800,000
Net Plant and Equipment.. 800,000
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Total Assets.$ 1,600,000
Liabilities and Stockholders Equity
Accounts Payable..$ 50,000
Notes Payable.. 250,000
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Total Current Liabilities..$ 300,000
Long Term Liabilities 300,000
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Total Liabilities ..$ 600,000
Common Stock. 400,000
Retained Earnings.. 600,000
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Total Stockholders Equity.$ 1,000,000
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