The Jimenez Corporation's forecasted 2013 financial statements follow, along with some industry average ratios. a. Calculate Jimenez's
Question:
The Jimenez Corporation's forecasted 2013 financial statements follow, along with some industry average ratios.
a. Calculate Jimenez's 2013 forecasted ratios, compare them with the industry average data, a d comment briefly on Jimenez's projected strengths and weaknesses.
b. What do you think would happen to Jimenez's ratios if the company initiated cost-cutting measures that allowed it to hold lower levels of inventory and substantially decreased the cost of goods sold? No calculations are necessary; think about which ratios would be affected by changes in these two accounts.
Jimenez Corporation: forecasted Balance sheet as of December 31, 2013
Assets
Cash......................................................................$ 72,000
Accounts receivable.....................................................439,000
Inventories...............................................................894,000
Total current assets.................................................$ 1,405,000
Fixed assets...............................................................431,000
Total assets...........................................................$ 1,836,000
Liabilities and Equity
Accounts and notes payable.........................................$ 432,000
Accruals..................................................................170,000
Total current liabilities...............................................$ 602,000
Long-term debt.........................................................404,290
Common stock..........................................................575,000
Retained earnings......................................................254,710
Total liabilities and equity.......................................$ 1,836,000
Jimenez Corporation: forecasted Income statement for 2013
Sales......................................................................$4,290,000
Cost of goods sold.......................................................3,580,000
Selling, general, and administrative expenses...........................370,320
Depreciation and amortization............................................159,000
Earnings before taxes (EBT) ...........................................$ 180,680
Taxes (40%)...................................................................72,272
Net income.................................................................$ 108,408
Per Share Data
EPS................................................................................$ 4.71
Cash dividends per share........................................................$ 0.95
P/E ratio...............................................................................5.0
Market price (average) ........................................................$ 23.57
Number of shares outstanding.................................................23,000
Industry Financial Ratios (2012)a
Quick ratio...........................................................................1.0
Current ratio..........................................................................2.7
Inventory turnoverb.................................................................7.0
Days sales outstandingc....................................................32.0 days
Fixed assets turnoverb............................................................13.0
Total assets turnoverb...............................................................2.6
Return on assets.......................................................................9.1%
Return on equity....................................................................18.2%
Debt ratio...............................................................................50.0%
Profit margin on sales...............................................................3.5%
P/E ratio....................................................................................6.0
Price/Cash flow ratio................................................................3.5
Industry average ratios have been constant for the past 4 years.
Based on year-end balance sheet figures.
Calculation is based on a 365-day year.
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Step by Step Answer:
a Here are the firms base case ratios and other data as compared to the industry Firm Industry Comme...View the full answer
Intermediate Financial Management
ISBN: 978-1111530266
11th edition
Authors: Eugene F. Brigham, Phillip R. Daves
