1. The company purchased plant assets for $20,000, which increased depreciation expense.
2. Marketable securities were sold at a loss of $1,000.
3. The company manages its accounts receivables in a downtrend, decreasing from $40,000 in 2023 to $23,000 in 2024.
4. The company manages its accounts receivables in an uptrend, increasing from $50,000 in 2023 to $73,000 in 2024.

1. Profitable analysis:

As of the end of the reporting period, the company's gross profit margin was 60%, and its net profit margin was -6.8%. The overall profitability of the company has decreased, with a decline in sales, significantly impacting the company's profit situation.

No.	Ratio	Formular	Calculation	2023	Calculation	2024
1	Gross profit margin	(sales - cost of goods sold) / sales	(500,000-200,000)/500,000	60%	(350,000-140,000)/350,000	60%
2	Net profit margin	net profit after tax / sales	40,000/500,000	8%	-34,000/500,000	-6.8%
3	Return on assets	net profit after tax / total assets	40,000/490,000	8.16%	-34,000/495,000	-6.86%
4	Return on equity	net profit after tax / total equity	40,000/(120,000+58,000)	22.47%	-34,000/(135,000+20,000)	21.94%

1. Activity analysis:

Debtors turnover +

Inventory turnover -

Creditor turnover -

Assets turnover -

No.	Ratio	Formular	Calculation	2023	Calculation	2024
1	Debtors turnover	sales / receivables	500,000 / 40,000	12.5	350,000 / 23,000	15.22
2	Days in receivables	Receivables / sales * 365	40,000 / 500,000 * 365	29	23,000 / 350,000 * 365	24
3	Inventory turnover	Cost of sales / inventory	200,000 / 120,000	1.67	140,000/ 122,000	1.15
4	Days in inventory	Inventories / cost of sales * 365	120,000 / 200,000 * 365	219	122,000 / 140,000 * 365	318
5	Creditor turnover	cost of sales / accounts payable	200,000 / 50,000	4	140,000 / 73,000	1.92
6	Days in payables	Accounts payable / cost of sales * 365	50,000 / 200,000 * 365	91	73,000 / 140,000 * 365	190
7	Assets turnover	Sales / total assets	500,000 / 490,000	1.02	350,000 / 495,000	0.71

1. Liquidity analysis:

Current ratio improved but still unfavourable (smaller than 1, relatively weak liquidity position)

Quick ratio improved but still unfavourable (concerning short-term liquidity)

No.	Ratio	Formular	Calculation	2023	Calculation	2024
1	Current ratio	current assets / current liabilities	(490,000-300,000) / (50,000+17,000+245,000)	60.90%	(495,000-285,000) / (73,000+14,000+253,000)	61.77%
2	Quick ratio	(current assets - inventories) / current liabilities	((490,000-300,000) - 120,000)/ (50,000+17,000+245,000)	22.44%	((495,000-285,000) - 122,000) / (73,000+14,000+253,000)	25.88%

1. Solvency risk

Debt ratio favourable (less than 1) but a higher Debt Ratio in 2024 than 2023 indicates potentially higher solvency risk.

Debt to equity indicates higher risk

No.	Ratio	Formular	Calculation	2023	Calculation	2024
1	Debt ratio	total liabilities / total assets	(50,000+17,000+245,000) / 490,000	63.67%	(73,000+14,000+253,000) / 495,000	68.69%
2	Debt to equity	total liabilities / shakeholders' equity	(50,000+17,000+245,000) / (120,000+58,000)	1.75	(73,000+14,000+253,000) / (135,000+20,000)	2.19

1. Cash flow generation

A decreased CCC shows improved cash flow

No.	Ratio	Formular	Calculation	2023	Calculation	2024
1	Cash flow to net income ratio	Net cash provided by operating activities / Net income	?
2	Cash conversion cycle	Days in inventory + days in receivables - days in payables	219+29-91	157	318+24-190	152

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Additional Information The following information regarding the company's operations in 2024 is available from the company's accounting records: 1. Early in the year the company declared and paid a $4,000 cash dividend. 2. During the year marketable securities costing $15,000 were sold for $14,000 cash, resulting in a $1,000 nonoperating loss. 3. The company purchased plant assets for $20,000, paying $2,000 in cash and issuing a note payable for the $18,000 balance. 4. During the year the company repaid a $10,000 note payable but incurred an additional $18,000 in long-term debt as described in 3. 5. The owners invested $15,000 cash in the business as a condition of the new loans described in paragraph 4. MIRACLE TOOL, INC. COMPARATIVE INCOME STATEMENT FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2024 2023 2024 Sales $500,000 $350,000 Less: Cost of goods sold 200,000 140,000 Gross profit on sales $300,000 $210,000 Less: Operating expenses (including depreciation of $34,000 in 2023 and $35,000 in 2024) Loss on sale of marketable securities 260,000 243,000 -0- 1,000 Net income (loss) $ 40,000 ($ 34,000) Assets Cash and cash equivalents Marketable securities Accounts receivable MIRACLE TOOL, INC. COMPARATIVE BALANCE SHEETS Inventory Plant and equipment (net of accumulated depreciation) Totals Liabilities & Stockholders' Equity Accounts payable Accrued expenses payable Note payable Capital stock (no par value) Retained earnings Totals December 31, 2023 2024 $ 10,000 $ 60,000 20,000 5,000 40,000 23,000 120,000 122,000 300,000 285,000 $490,000 $495,000 $ 50,000 17,000 245,000 $ 73,000 14,000 253,000 135,000 20,000 $ 495,000 120,000 58,000 $490,000 Additional Information The following information regarding the company's operations in 2024 is available from the company's accounting records: 1. Early in the year the company declared and paid a $4,000 cash dividend. 2. During the year marketable securities costing $15,000 were sold for $14,000 cash, resulting in a $1,000 nonoperating loss. 3. The company purchased plant assets for $20,000, paying $2,000 in cash and issuing a note payable for the $18,000 balance. 4. During the year the company repaid a $10,000 note payable but incurred an additional $18,000 in long-term debt as described in 3. 5. The owners invested $15,000 cash in the business as a condition of the new loans described in paragraph 4. MIRACLE TOOL, INC. COMPARATIVE INCOME STATEMENT FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2024 2023 2024 Sales $500,000 $350,000 Less: Cost of goods sold 200,000 140,000 Gross profit on sales $300,000 $210,000 Less: Operating expenses (including depreciation of $34,000 in 2023 and $35,000 in 2024) Loss on sale of marketable securities 260,000 243,000 -0- 1,000 Net income (loss) $ 40,000 ($ 34,000) Assets Cash and cash equivalents Marketable securities Accounts receivable MIRACLE TOOL, INC. COMPARATIVE BALANCE SHEETS Inventory Plant and equipment (net of accumulated depreciation) Totals Liabilities & Stockholders' Equity Accounts payable Accrued expenses payable Note payable Capital stock (no par value) Retained earnings Totals December 31, 2023 2024 $ 10,000 $ 60,000 20,000 5,000 40,000 23,000 120,000 122,000 300,000 285,000 $490,000 $495,000 $ 50,000 17,000 245,000 $ 73,000 14,000 253,000 135,000 20,000 $ 495,000 120,000 58,000 $490,000