Financial Ratios
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Use the annual information found that can be found by clicking here to answer this assignment. Calculate the following asset activity ratios for the end of 2005:
FIN410 Unit 2 Individual Project #2
ABC Fitness 000's
Income Statement Dec-05
Sales 2004.016
Cost of Goods Sold 1446.733
Gross Profit 557.283
Selling and Ad
Expenses 361.402
Depreciation 56.87
Operating Income
(EBIT) 139.011
Interest expense 34.482
Other Expense 14.124
EBT 90.405
Taxes 24.701
Net Income 65.704
Balance Sheet
Assets
Cash 25.32
Net Receivables 55.514
Inventories 141.35
Prepaids 8.775
Total Current Assets 230.959
Gross Plant &
Equipment 536.74
Accumulated
Depreciation (161.7)
Net Plant &
Equipment 507.34
Other Assets 4.621
Total Assets 1117.96
Liabilities
Notes Payable 1.127
Accounts Payable 144.638
Taxes Payable 16.797
Accrued Expense 98.233
Total Current Liabilities 260.795
Long-Term Debt 415.138
Deferred Taxes 20.396
Total Liabilities 696.329
Equity
Common Stock 0.32
Capital Surplus 242.843
Retained Earnings 178.468
Total Equity 421.631
Total Liabilities and
Equity 1117.96
1. Average Collection Period
2. Inventory Turnover
3. Total Asset Turnover
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Solution Summary
MS Excel spreadsheet contains example of financial ratios that are used to determine a firms financial health and profitability.
Solution Preview
For your convenience, I have attached a formatted MS Excel spreadsheet which contains explanations and instructions for the ratios utilized in this exercise.
1. The Average Collection Period is a litmus test for the quality of a firm's receivables business. Providing them with the average length of their collection period. As a rule, outstanding receivables should not exceed credit terms by 10-15 days.
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