Problem 1)

Using the Financial Statements for Joe's Gadgets, find the following ratios for 2016 and 2017.

1a. Current ratio

1b. Quick ratio (Acid Test)

1c. Inventory Turnover Ratio

1d. Days Sales Outstanding (Average Collection Period)

1e. Fixed Assets Turnover

1f. Total Assets Turnover

1g. Total Debt to Total Assets (Debt Ratio)

1h. Total Debt to Equity

1i. Times Interest Earned

1j. Gross Profit Margin

1k. Net Profit Margin

1l. Return on Assets

1m. Return on Equity

1n. Price Earnings Ratio

1o. Market-to-Book Ratio

1p. Dividend Yield

Problem 2)

Using the Financial Statements for Joe's Gadgets, prepare common size income statements and balance sheets for 2016 & 2017.

Problem 3)

Use the following industry average ratios for 2017 and your answers to Problem 1 and Problem 2 to highlight any strengths and weaknesses for Joes Gadgets.

3a. Current ratio 1.75

3b. Quick ratio 1.00

3c. Inventory Turnover Ratio 4.75

3d. Days Sales Outstanding 50.0

3e. Fixed Assets Turnover 1.30

3f. Total Assets Turnover 0.50

3g. Total Debt to Total Assets 0.55

3h. Total Debt to Equity 1.22

3i. Times Interest Earned 3.25

3j. Gross Profit Margin 46.53%

3k. Net Profit Margin 4.88%

3l. Return on Assets 4.17%

3m. Return on Equity 12.02%

3n. Price Earnings Ratio 24.15

3o. Market-to-Book Ratio 3.98

3p. Dividend Yield 1.99%

INCOME STATEMENT 2016 2017 Sales 15,000,000 20,000,000 COGS 6,000,000 11,000,000 S&A Expenses 3,000,000 3,500,000 Depreciation 2,000,000 2,500,000 EBIT (Operating Income) 4,000,000 3,000,000 Taxes (30%) 900,000 450,000 Net Income 2,100,000 1,050,000 Number of Shares EPS Dividends per Share Stock Price 2,000,000 2,000,000 $1.05 $0.525 $0.50 $0.50 $25.00 $17.50 BALANCE SHEET Cash AR Inv. 2017 3.,050,000 4,000,000 4,000,000 11,050,000 11,000,000 Cur. Assets Net Prop, Plant & Equip Total Assets A/P Accruals Notes Payable 2016 3,000,000 2,000,000 2,000,000 7,000,000 10,000,000 17,000,000 2,500,000 1,500,000 500,000 4,500,000 5,500,000 10,000,000 1,000,000 6,000,000 7,000,000 17,000,000 22,050,000 3,500,000 2,000,000 1,500,000 7,000,000 Cur. Liabilities Long-Term Debt Total Liabilities Common Stock Retained Earnings Owners Equity Tot. Liab. & C.E. 8,000,000 15,000,000 1,000,000 6,050,000 7,050,000 22,050,000