Ratio analysis of Excelsior
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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%
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Solution Summary
The solution shows calculations for obtaining financial ratios for a company and benchmarking them against industry standards.
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 ...
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