# Calculating and Explaining Financial Ratios - Riordan Manufacturing and Kudler Fine Foods

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• Ratio.doc
• OperCashBudget2005.xls
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• RiordanKudlerratioanalysis.xls

Extracted Content from Question Files:

• Ratio.doc

Prepare a 3-5 page report defining each ratio and why each is
important to a business or organization. Then, using the data found on
the VOP calculate the value of each for both Riordan Manufacturing and
Kudler Fine Foods.

A. Define, calculate and explain the following financial ratios for Riordan
Manufacturing:

Current ratio
Debt ratio
Profit margin
ROA

B. Identify the average P/E for the manufacturing industry and compare
its value to Riordan Manufacturing.

C. Define, calculate and explain the following financial ratios for Kudler
Fine Foods:

Current ratio
Debt ratio
Profit margin
ROA

D. Identify the average P/E for the food service industry and compare its
value to Kudler Fine Foods.
Balance Sheet

Kudler Fine Foods
Balance Sheet
December 31, 2003

Assets

Current Assets:

Cash
Accounts Receivable
Merchandise Inventory
Prepaid Expenses
Notes Receivable

\$86,000
\$0

\$1,430,000

\$86,000
\$429,000
\$26,000
\$0

Total Current Assets

\$1,971,000

Fixed Assets:

Vehicles
Less: Accumulated Depreciation

Furniture and Fixtures
Less: Accumulated Depreciation

Equipment
Less: Accumulated Depreciation

\$63,000
\$27,750
\$435,000
\$186,000

\$634,000
\$214,000

\$35,250

\$249,000

\$420,000

Total Fixed Assets

\$704,250

Other Assets:

Goodwill

\$0

Total Other Assets

\$0

TOTAL ASSETS

\$2,675,250

Liabilities and Capital

Current Liabilities:

Accounts Payable
Sales Tax Payable
Payroll Taxes Payable
Accrued Wages Payable
Unearned Revenues
Short-Term Notes Payable
Short-Term Bank Loan Payable

\$96,500
\$3,950
\$15,840
\$0
\$0
\$0
\$0

Total Current Liabilities

\$116,290

Long-Term Liabilities:

Long-Term Notes Payable

\$630,000

Total Long-Term Liabilities

\$630,000

TOTAL LIABILITIES

\$746,290

Capital:

Owner's Equity
Net Profit

\$746,290
\$1,182,670

TOTAL CAPITAL

\$1,928,960

TOTAL LIABILITIES AND CAPITAL

\$2,675,250
Income Statement
Revenue:

Gross Sales
Less: Sales Returns and Allowances

\$10,804,000
\$7,800

Net Sales

\$10,796,200

Cost of Goods Sold:

Beginning Inventory
Purchases
Freight-in
Direct Labor
Indirect Expenses

\$467,890

\$3,752,891
\$165,010
\$3,769,591
\$748,539

\$8,903,921

Less: Ending Inventory

\$429,090

Cost of Goods Sold

\$8,474,831

Gross Profit (Loss)

\$2,321,369
Expenses:

Amortization
Bank Charges
Charitable Contributions
Bonuses
Systems & Network Contract
Credit Card Fees
HR Payroll Outsource
Depreciation
Dues and Subscriptions
Insurance
Custodial Contract
Interest
Maintenance Contract
Miscellaneous
Office Expenses
Operating Supplies
Postage
Professional Fees
Office Lease
Repairs
Telephone
Travel
Utilities
Vehicle Expenses
Wages

\$263,000
\$2,700
\$2,300
\$19,258
\$5,000
\$65,000
\$82,000
\$125
\$8,500
\$27,750
\$29,403
\$65,000
\$48,000
\$63,768
\$36,000
\$1,100
\$8,300
\$5,500
\$8,200
\$3,500
\$46,000
\$32,157
\$63,000
\$850
\$16,500
\$4,500
\$7,900
\$11,458
\$725,650

Total Expenses

\$1,652,419

Net Operating Income

\$668,950

Other Income:

Gain (Loss) on Sale of Assets
Interest Income

\$0
\$7,845

Total Other Income

\$7,845

Net Income (Loss)

\$676,795

• OperCashBudget2005.xls

Riordan Manufacturing, Inc.
Operating Budget FY 2005
Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep.
2004 2004 2004 2005 2005 2005 2005 2005 2005 2005 2005 2005

\$3,976,000 \$4,182,000 \$4,798,000 \$4,182,000 \$4,190,000 \$3,846,000 \$3,460,000 \$3,578,000 \$5,210,600 \$5,350,200 \$4,726,000 \$2,765,221
Sales
Direct cost of Goods Sold \$3,236,464 \$3,404,148 \$3,905,572 \$3,404,148 \$3,410,660 \$3,130,644 \$2,816,440 \$2,912,492 \$4,241,428 \$4,355,063 \$3,846,964 \$2,250,890
Gross Margin \$739,536 \$777,852 \$892,428 \$777,852 \$779,340 \$715,356 \$643,560 \$665,508 \$969,172 \$995,137 \$879,036 \$514,331

Operating Expenses
Sales, Marketing & Other \$85,000 \$85,000 \$85,000 \$85,000 \$85,000 \$85,000 \$85,000 \$85,000 \$85,000 \$85,000 \$85,000 \$85,000
Depreciation \$36,000 \$36,000 \$36,000 \$36,000 \$36,000 \$36,000 \$36,000 \$36,000 \$36,000 \$36,000 \$36,000 \$36,000
Quality Assurance \$98,500 \$98,500 \$98,500 \$98,500 \$98,500 \$98,500 \$98,500 \$98,500 \$98,500 \$98,500 \$98,500 \$98,500
Research & Development \$75,250 \$75,250 \$75,250 \$75,250 \$75,250 \$75,250 \$75,250 \$75,250 \$75,250 \$75,250 \$75,250 \$75,250
General & Administrative \$151,000 \$151,000 \$151,000 \$151,000 \$151,000 \$151,000 \$151,000 \$151,000 \$151,000 \$151,000 \$151,000 \$151,000
Machining & Systems \$54,500 \$54,500 \$54,500 \$54,500 \$54,500 \$54,500 \$54,500 \$54,500 \$54,500 \$54,500 \$54,500 \$54,500
Total Operating Expenses \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250
Profit Before Interest & Taxes \$239,286 \$277,602 \$392,178 \$277,602 \$279,090 \$215,106 \$143,310 \$165,258 \$468,922 \$494,887 \$378,786 \$14,081

Non-Operating Expenses
Interest Expense \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450
Taxes \$74,064 \$87,092 \$126,048 \$87,092 \$87,598 \$65,843 \$41,432 \$48,895 \$152,140 \$160,969 \$121,494 (\$2,505)
Total Non-Operating Expenses \$95,514 \$108,542 \$147,498 \$108,542 \$109,048 \$87,293 \$62,882 \$70,345 \$173,590 \$182,419 \$142,944 \$18,945
Net Profit after Taxes \$143,772 \$169,060 \$244,680 \$169,060 \$170,042 \$127,813 \$80,428 \$94,913 \$295,331 \$312,469 \$235,842 (\$4,863)
Riordan Manufacturing, Inc.
Cash Budget FY 2005

Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep.
2004 2004 2004 2005 2005 2005 2005 2005 2005 2005 2005 2005
Cash Inflows
Collections from Sales \$2,535,000 \$3,976,000 \$4,182,000 \$4,798,000 \$4,182,000 \$4,190,000 \$3,846,000 \$3,460,000 \$3,578,000 \$5,210,600 \$5,350,200 \$4,726,000
Interest Income \$11,500 \$11,500 \$11,500 \$11,500 \$11,500 \$11,500 \$11,500 \$11,500 \$11,500 \$11,500 \$11,500 \$11,500
\$2,546,500 \$3,987,500 \$4,193,500 \$4,809,500 \$4,193,500 \$4,201,500 \$3,857,500 \$3,471,500 \$3,589,500 \$5,222,100 \$5,361,700 \$4,737,500
Total Cash Inflows

Cash Outflows
Payments for Raw Materials \$735,000 \$1,132,762 \$1,191,452 \$1,366,950 \$1,191,452 \$1,193,731 \$1,095,725 \$985,754 \$1,019,372 \$1,484,500 \$1,524,272 \$1,346,437
Payments for Direct Labor \$2,103,702 \$2,212,696 \$2,538,622 \$2,212,696 \$2,216,929 \$2,034,919 \$1,830,686 \$1,893,120 \$2,756,928 \$2,830,791 \$2,500,527 \$1,463,078
Operating Expenses \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250 \$500,250
Depreciation (\$36,000) (\$36,000) (\$36,000) (\$36,000) (\$36,000) (\$36,000) (\$36,000) (\$36,000) (\$36,000) (\$36,000) (\$36,000) (\$36,000)
Interest Expense \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450 \$21,450
Corporate Tax Payments \$287,203 \$240,532 \$242,467 \$279,957
Capital Expenditures \$250,000 \$250,000 \$350,000
\$3,574,402 \$3,831,159 \$4,502,977 \$4,315,346 \$3,894,081 \$3,954,882 \$3,762,111 \$3,364,574 \$4,504,468 \$4,800,991 \$4,510,499 \$3,575,173
Total Cash Outflows

(\$1,027,902) \$156,341 (\$309,477) \$494,154 \$299,419 \$246,618 \$95,389 \$106,926 (\$914,968) \$421,109 \$851,201 \$1,162,327
Net Cash Flows
Beginning Cash on Hand \$357,216 (\$670,686) (\$514,344) (\$823,821) (\$329,668) (\$30,248) \$216,370 \$311,758 \$418,684 (\$496,284) (\$75,174) \$776,027
Ending Cash on Hand (\$670,686) (\$514,344) (\$823,821) (\$329,668) (\$30,248) \$216,370 \$311,758 \$418,684 (\$496,284) (\$75,174) \$776,027 \$1,938,354
Annual

\$50,264,021
\$40,914,913
\$9,349,108

\$1,020,000
\$432,000
\$1,182,000
\$903,000
\$1,812,000
\$654,000
\$6,003,000
\$3,346,108

\$257,400
\$1,050,161
\$1,307,561
\$2,038,547