Your company is considering acquiring a private company (New Co., Inc.). The CFO has asked you to review the financial statements, look for key trends, and develop financial/operational questions to ask the management of New Co. when you meet next week. Calculate average collection period, total asset turnover, inventory turnover, and days in inventory.

1. Calculate average collection period, total asset turnover, inventory turnover, and days in inventory for the four years.
2. Assess the trends in activity of the firm, using your calculations in part 1, over the four year period.
3. Calculate the gross profit margin, operating margin, and net profit margin.
4. Assess the profitability trends of the firm, using your calculations in part 3, over the four- year period.
5. Develop three or four questions to ask the management of New Co. to help your management team understand trends uncovered by the ratio analysis.

Balance Sheet:

	12/31/22	12/31/21	12/31/20	12/31/19
Current Assets
Cash and Cash Equivalents	1,101,000	2,240,000	1,976,000	2,432,000
Short Term Investments	2,196,000	1,848,000	1,384,000	1,539,000
Net Receivables	1,049,000	1,347,000	1,162,000	1,280,000
Inventory	5,209,000	4,864,000	5,051,000	5,174,000
Other Current Assets	274,000	217,000	313,000	1,047,000
Total Current Assets	9,829,000	10,516,000	9,886,000	11,472,000
Long Term Investments	0	13,000	27,000	3,000
Property Plant and Equipment	2,421,000	2,293,000	2,346,000	2,295,000
Goodwill	425,000	425,000	425,000	425,000
Intangible Assets	18,000	18,000	18,000	18,000
Other Assets	356,000	591,000	817,000	1,032,000
Total Assets	13,049,000	13,856,000	13,519,000	15,245,000
Current Liabilities
Accounts Payable	4,873,000	4,984,000	4,450,000	5,030,000
Short / Current Long Term Debt	499,000	0	350,000	0
Other Current Liabilities
Total Current Liabilities	7,817,000	7,122,000	6,925,000	7,777,000
Long Term Debt	948,000	1,158,000	1,168,000	1,492,000
Other Liabilities
Total Liabilities	9,437,000	9,147,000	9,141,000	10,250,000
Stockholders' Equity
Total Stockholder Equity	3,612,000	4,709,000	4,378,000	4,995,000

Income statement:

	12/31/22	12/31/21	12/31/20	12/31/19
Revenue
Total Revenue	37,651,000	40,403,000	39,528,000	40,339,000
Cost of Revenue	29,175,000	30,963,000	30,334,000	31,292,000
Gross Profit	8,476,000	9,444,000	9,194,000	9,047,000
Operating Expenses
Selling General and Administrative	7,911,000	7,493,000	7,612,000	7,550,000
Operating Income or Loss	565,000	1,947,000	1,582,000	1,497,000
Income from Continuing Operations
Interest Expense	75,000	72,000	80,000	90,000
Income Before Tax	490,000	1,875,000	1,502,000	1,407,000
Income Tax Expense	418,000	609,000	503,000	141,000
Add Discontinued Operations	-1,000	-21,000	-90,000	-13,000
Net Income	71,000	1,245,000	909,000	1,253,000

Answer rating: 100% (QA)

Formulas Average Collection Period Average Accounts Receivable Net Receivables 123122 Net Receivables 123121 Net Receivables 123120 Net Receivables 12... View the full answer