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Ratio Analysis

Betsen Boutique also has asked you to calculate selected financial ratios and compare them with industry norms.

Use the same data supplied in question 3, reproduced attached, along with Income Statement information from Question 3.

See attached file for full problem description.

Item 2004 2003

Accounts Payable $12,000 $10,700
Accounts Receivable $54,400 $55,300
Accumulated Depreciation $30,200 $27,900
Cash & Equivalents $10,500 $9,700
Common Stock $40,500 $40,500
Cost of Goods Sold $108,400 $92,600
Depreciation $2,300 $2,250
Fixed Expenses $7,600 $7,000
Interest $3,400 $2,900
Inventory $42,700 $37,800
Long-term Debt $32,000 $29,800
Other Current Liabilities $8,400 $8,600
Plant & Equipment $56,900 $53,000
Retained Earnings $22,700 $18,200
Sales $150,500 $138,200
Selling, G & A $15,500 $13,400
Short Term Notes $18,700 $20,100
Tax Rate 30% 30%

BETSEN BOUTIQUE
Financial Ratios
as of Dec. 31, 2004

Industry
Ratio 2004 2004 2003

Current 2.60x

Inventory Turnover 3.00x
A/R Turnover 4.50x
Total Asset Turnover 2.40x

Debt Ratio 50.00%

T.I.E. 6.00x

Net Profit Margin 9.25%
Return on Assets 11.00%
Return on Equity 20.00%

What are your recommendations to management?

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Solution Summary

The solution explains the calculation of various ratios and comparison with industry

$2.19