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Ratio analysis of Excelsior

Complete the following table using the data provided on pages 6 and 7. Note that after calculating the ratios for the company, indicating whether it is better or worse than the industry average for that category.

Ratio Analysis for Excelsior, Inc.
2000X Industry Avgs Better / Worse?
Liquidity
Current ratio = current assets/current liabilities 2.70

Quick ratio =
(current assets - inventories)/current liabilities 1.00

Asset Management
Inventory Turnover = sales/inventories 6.10

Days Sales Outstanding = Receivables / (sales / 360) 32.00

Fixed Asset Turnover = sales / net fixed assets 7.00

Total Assets Turnover = sales / total assets 2.60

Debt Management
Total Debt to Total Assets = total debt / total assets 50%

Times interest earned = EBIT / interest charges 6.20

Debt/Equity = Debt/Shareholder's Equity 40%

Profitability
Profit Margin = Net Income / Sales 3.5%

ROA = Net income / total assets 9.1%

ROE = Net income / company equity 18.2%

Balance Sheet 200X
ASSETS
Cash $ 90,000
Accounts Receivable $ 950,000
Inventories $ 1,500,000
Total Current Assets $ 2,540,000

Gross Fixed Assets $ 1,500,000
Less Accumulated Depreciation $ 250,000
Net Fixed Assets $ 1,750,000

Total Assets $ 4,290,000

LIABILITIES AND EQUITY
Accounts Payable $ 400,000
Notes Payable $ 600,000
Accruals $ 350,000
Total Current Liabilities $ 1,350,000

Long-term Debt $ 500,000

Total Liabilities $ 1,850,000

Common Stock $ 1,500,000
Retained Earnings $ 940,000
Total Equity $ 2,440,000

Total Liabilities and Equity $ 4,290,000

Income Statement
2000
Sales $ 7,500,000

Cost of Goods Sold $ 5,900,000
Other Expenses $ 680,000
EBITDA $ 920,000
Depreciation $ 100,000
EBIT $ 820,000
Interest Expense $ 88,000
EBT $ 732,000
Taxes (40%) $ 292,800
Net Income $ 439,200

Dividends per share $ 0.220
Stock Price $ 16.50
Shares Outstanding 250,000
Tax Rate 40%

Solution Preview

Current Ratio=Current Assets/Current Liabilities=$2,540,000/$1,350,000=1.88, worse than the industry average of 2.70

Quick Ratio=(Current Assets-Inventory)/Current Liabilities=($2,540,000-$1,500,000)/$1,350,000=
$1,040,000/$1,350,000=0.77, worse than the industry average of 1.00

Inventory ...

Solution Summary

The solution shows calculations for obtaining financial ratios for a company and benchmarking them against industry standards.

$2.19