From the following financial statements, compute the required ratios (for year 2002 and 2003) and analyse them with respect to the industry averages. FINANCIAL STATEMENTS INCOME STATEMENT FOR YEAR ENDING DECEMBER 31 2003 2002 2001 Sales 6,500,000.00 5,550,000.00 4,050,000.00 Cost of Goods Sold 3,965,000.00 3,385,500.00 2,430,000.00 Gross Profit 2,535,000.00 2,164,500.00 1,620,000.00 Depreciation 485,600.00 287,200.00 158,500.00 Other Operating expenses 1,690,000.00 1,387,500.00 1,012,500.00 EBIT 359,400.00 489,800.00 449,000.00 Interest 331,956.00 160,125.00 50,645.00 EBT 27,444.00 329,675.00 398,355.00 Income Taxes 10,978.00 131,870.00 159,342.00 Net Income 16,466.00 197,805.00 239,013.00 BALANCE SHEET FOR YEAR ENDING DECEMBER 31 2003 2002 2001 Cash 57,000.00 110,000.00 155,000.00 Accounts Receivable 95,000.00 59,000.00 45,000.00 Inventories 1,050,000.00 723,000.00 540,000.00 Prepaid expenses 42,000.00 36,000.00 25,000.00 Total Current assets 1,244,000.00 928,000.00 765,000.00 Property, Plant and Equipment 7,288,800.00 4,819,200.00 3,245,000.00 less: Accumulated Depreciation 2,432,800.00 1,947,200.00 1,660,000.00 Net Property, Plant and Equipment 4,856,000.00 2,872,000.00 1,585,000.00 Total Assets 6,100,000.00 3,800,000.00 2,350,000.00 Accounts Payable 440,556.00 165,000.00 99,000.00 Line of Credit 570,638.00 353,000.00 267,435.00 Current portion of long term debt 325,346.00 162,000.00 41,461.00 Total Current Liabilities 1,336,540.00 680,000.00 407,896.00 Long term debt 3,253,460.00 1,620,000.00 414,604.00 Equity 1,510,000.00 1,500,000.00 1,527,500.00 Total Liabilities and Equity 6,100,000.00 3,800,000.00 2,350,000.00 Industry Averages Current ratio 1.9 Inventory turnover in days 60 Days Accounts receivables turnover in days 30 Days Fixed Assets Turnover 3.19 Total Assets Turnover 2 Debt ratio 30.00% Net Profit Margin 6.71% Gross Profit Margin 42.00% Return on assets 13.42% Return on Equity 19.17%

From the following financial statements, compute the required ratios (for year 2002 and 2003) and analyse them with respect to the industry averages. FINANCIAL STATEMENTS INCOME STATEMENT FOR YEAR ENDING DECEMBER 31 2003 2002 2001 Sales 6,500,000.00 5,550,000.00 4,050,000.00 Cost of Goods Sold 3,965,000.00 3,385,500.00 2,430,000.00 Gross Profit 2,535,000.00 2,164,500.00 1,620,000.00 Depreciation 485,600.00 287,200.00 158,500.00 Other Operating expenses 1,690,000.00 1,387,500.00 1,012,500.00 EBIT 359,400.00 489,800.00 449,000.00 Interest 331,956.00 160,125.00 50,645.00 EBT 27,444.00 329,675.00 398,355.00 Income Taxes 10,978.00 131,870.00 159,342.00 Net Income 16,466.00 197,805.00 239,013.00 BALANCE SHEET FOR YEAR ENDING DECEMBER 31 2003 2002 2001 Cash 57,000.00 110,000.00 155,000.00 Accounts Receivable 95,000.00 59,000.00 45,000.00 Inventories 1,050,000.00 723,000.00 540,000.00 Prepaid expenses 42,000.00 36,000.00 25,000.00 Total Current assets 1,244,000.00 928,000.00 765,000.00 Property, Plant and Equipment 7,288,800.00 4,819,200.00 3,245,000.00 less: Accumulated Depreciation 2,432,800.00 1,947,200.00 1,660,000.00 Net Property, Plant and Equipment 4,856,000.00 2,872,000.00 1,585,000.00 Total Assets 6,100,000.00 3,800,000.00 2,350,000.00 Accounts Payable 440,556.00 165,000.00 99,000.00 Line of Credit 570,638.00 353,000.00 267,435.00 Current portion of long term debt 325,346.00 162,000.00 41,461.00 Total Current Liabilities 1,336,540.00 680,000.00 407,896.00 Long term debt 3,253,460.00 1,620,000.00 414,604.00 Equity 1,510,000.00 1,500,000.00 1,527,500.00 Total Liabilities and Equity 6,100,000.00 3,800,000.00 2,350,000.00 Industry Averages Current ratio 1.9 Inventory turnover in days 60 Days Accounts receivables turnover in days 30 Days Fixed Assets Turnover 3.19 Total Assets Turnover 2 Debt ratio 30.00% Net Profit Margin 6.71% Gross Profit Margin 42.00% Return on assets 13.42% Return on Equity 19.17%

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 56P: The following selected information is taken from the financial statements of Arnn Company for its...

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From the following financial statements, compute the required ratios (for year 2002 and 2003) and analyse them with respect to the industry averages.

FINANCIAL STATEMENTS
INCOME STATEMENT
FOR YEAR ENDING DECEMBER 31
	2003	2002	2001
Sales	6,500,000.00	5,550,000.00	4,050,000.00
Cost of Goods Sold	3,965,000.00	3,385,500.00	2,430,000.00
Gross Profit	2,535,000.00	2,164,500.00	1,620,000.00
Depreciation	485,600.00	287,200.00	158,500.00
Other Operating expenses	1,690,000.00	1,387,500.00	1,012,500.00
EBIT	359,400.00	489,800.00	449,000.00
Interest	331,956.00	160,125.00	50,645.00
EBT	27,444.00	329,675.00	398,355.00
Income Taxes	10,978.00	131,870.00	159,342.00
Net Income	16,466.00	197,805.00	239,013.00
BALANCE SHEET
FOR YEAR ENDING DECEMBER 31
	2003	2002	2001
Cash	57,000.00	110,000.00	155,000.00
Accounts Receivable	95,000.00	59,000.00	45,000.00
Inventories	1,050,000.00	723,000.00	540,000.00
Prepaid expenses	42,000.00	36,000.00	25,000.00
Total Current assets	1,244,000.00	928,000.00	765,000.00
Property, Plant and Equipment	7,288,800.00	4,819,200.00	3,245,000.00
less: Accumulated Depreciation	2,432,800.00	1,947,200.00	1,660,000.00
Net Property, Plant and Equipment	4,856,000.00	2,872,000.00	1,585,000.00
Total Assets	6,100,000.00	3,800,000.00	2,350,000.00

Accounts Payable	440,556.00	165,000.00	99,000.00
Line of Credit	570,638.00	353,000.00	267,435.00
Current portion of long term debt	325,346.00	162,000.00	41,461.00
Total Current Liabilities	1,336,540.00	680,000.00	407,896.00
Long term debt	3,253,460.00	1,620,000.00	414,604.00
Equity	1,510,000.00	1,500,000.00	1,527,500.00
Total Liabilities and Equity	6,100,000.00	3,800,000.00	2,350,000.00

Industry Averages
Current ratio	1.9
Inventory turnover in days	60 Days
Accounts receivables turnover in days	30 Days
Fixed Assets Turnover	3.19
Total Assets Turnover	2
Debt ratio	30.00%
Net Profit Margin	6.71%
Gross Profit Margin	42.00%
Return on assets	13.42%
Return on Equity	19.17%

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