You are a financial manager in Gama Corporation. You have the task of getting the company back

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Question:

You are a financial manager in Gama Corporation. You have the task of getting the company back into a sound financial position. Gama Corporation's 2017 and 2018 balance sheets and income statements, together with projections for 2019, are shown in the following tables. The tables also show the 2017 and 2018 financial ratios, along with the industry average data. Your assignment is to answer the following questions. Provide clear explanations, not vague answers. Display work for the calculations.

Balance Sheets
Assets	2017	2018	2019 (Projected)
Cash	$ 9,000	$ 7,282	$ 14,000
Short-Term Investments.	48,600	20,000	71,632
Accounts Receivable	351,200	632,160	878,000
Inventories	715,200	1,287,360	1,716,480
Total Current Assets	$ 1,124,000	$ 1,946,802	$ 2,680,112
Gross Fixed Assets	491,000	1,202,950	1,220,000
Less: Accumulated Depreciation	146,200	263,160	383,160
Net Fixed Assets	$ 344,800	$ 939,790	$ 836,840
Total Assets	$ 1,468,800	$ 2,886,592	$ 3,516,952

Liabilities And Equity	2017	2018	2019 (Projected)
Accounts Payable	$ 145,600	$ 324,000	$ 359,800
Notes Payable	200,000	720,000	300,000
Accruals	136,000	284,960	380,000
Total Current Liabilities	$ 481,600	$ 1,328,960	$ 1,039,800
Long-Term Debt	323,432	1,000,000	500,000
Common Stock (100,000 Shares)	460,000	460,000	1,680,936
Retained Earnings	203,768	97,632	296,216
Total Equity	$ 663,768	$ 557,632	$ 1,977,152
Total Liabilities And Equity	$ 1,468,800	$ 2,886,592	$ 3,516,952

Income Statements
	2017	2018	2019(Projected)
Sales	$ 3,432,000	$ 5,834,400	$ 7,035,600
COGS except depr.	2,864,000	4,980,000	5,800,000
Depreciation	18,900	116,960	120,000
Other Expenses	340,000	720,000	612,960
Total Operating Costs	$ 3,222,900	$ 5,816,960	$ 6,532,960
EBIT	$ 209,100	$ 17,440	$ 502,640
Interest Expense	62,500	176,000	80,000
EBT	$ 146,600	$ (158,560)	$ 422,640
Taxes (40%)	58,640	(63,424)	169,056
Net Income	$ 87,960	$ (95,136)	$ 253,584

Other Data	2017	2018	2019(Projected)
Stock Price	$ 8.50	$ 6.00	$ 12.17
Shares Outstanding	100,000	100,000	250,000
EPS (Earnings per share)	$ 0.880	$ (0.951)	$ 1.014
DPS (Dividend per share)	$ 0.220	$ 0.110	$ 0.220
Tax Rate	40%	40%	40%
Book Value Per Share	$ 6.638	$ 5.576	$ 7.909

Ratio Analysis	2017	2018	2019(Projected)	Industry Average
Current	2.3	1.5	?	2.7
Quick	0.8	0.5	?	1.0
Fixed Assets Turnover	10.0	6.2	?	7.0
Total Assets Turnover	2.3	2.0	?	2.5
Debt to Asset Ratio	35.6%	59.6%	?	32.0%
TIE	3.3	0.1	?	6.2
Profit Margin	2.6%	-1.6%	?	3.6%
Basic Earning Power	14.2%	0.6%	?	17.8%
ROA	6.0%	-3.3%	?	9.0%
ROE	13.3%	-17.1%	?	17.9%
Price/Earnings (P/E)	9.7	-6.3	?	16.2
Market/Book	1.3	1.1	?	2.9

Why are ratios useful?
Calculate the 2019 current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company's liquidity position in 2017, 2018, and as projected for 2019?
We often think of ratios as being useful (1) to managers to help run the business, (2) to bankers for credit analysis, and (3) to stockholders for stock valuation. Would these different types of analysts have an equal interest in the liquidity ratios?
Calculate the 2019 fixed assets turnover, and total assets turnover. How does the firm's utilization of assets stack up against other firms in its industry?
Calculate the 2019 debt to asset ratio and times-interest-earned. How does the firm compare with the industry with respect to financial leverage? What can you conclude from these ratios?
Calculate the 2019 profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these ratios?
Calculate the 2019 price/earnings ratio and market/book ratio. Do these ratios indicate that investors are expected to have a high or low opinion of the company?