Lan & Chen Technologies: Income Statements for Year Ending December 31 (Thousands of Dollars) 2018 2017 Sales $945,000 $900,000 Expenses excluding depreciation and amortization 812,700 774,000 EBITDA $132,300 $126,000 Depreciation and amortization 33,100 31,500 EBIT $99,200 $94,500 Interest Expense 10,470 8,600 EBT $88,730 $85,900 Taxes (40%) 35,492 34,360 Net income $53,238 $51,540 Common dividends $43,300 $41,230 Addition to retained earnings $9,938 $10,310 Lan & Chen Technologies: December 31 Balance Sheets (Thousands of Dollars) Assets 2018 2017 Cash and cash equivalents $47,250 $45,000 Short-term investments 3,800 3,400 Accounts Receivable 283,500 269,000 Inventories 141,750 136,000 Total current assets $476,300 $453,400 Net fixed assets 330,750 315,000 Total assets $807,050 $768,400 Liabilities and equity Accounts payable $94,500 $89,800 Accruals 47,250 45,000 Notes payable 26,262 9,000 Total current liabilities $168,012 $143,800 Long-term debt 94,500 90,000 Total liabilities $262,512 $233,800 Common stock 444,600 444,600 Retained Earnings $99,938 90,000 Total common equity $544,538 $534,600 Total liabilities and equity $807,050 $768,400 Ratio Analysis 2018 2017 Industry Avg Liquidity Ratios Current Ratio 2.90 Quick Ratio 1.90 Asset Management Ratios Inventory Turnover (Total COGS/Inventories) Days Sales Outstanding 98.00 Fixed Assets Turnover 2.56 Total Assets Turnover 1.23 Debt Management Ratios Debt Ratio (Total debt-to-assets) 20.0% Liabilities-to-assets ratio 32.1% Times-interest-earned ratio 12.33 Profitability Ratios Profit Margin 6.25% Basic Earning Power 10.25% Return on Assets 6.75% Return on Equity 9.46% Market Value Ratios Earnings per share NA Price-to-earnings ratio 15.65 Cash flow per share NA Price-to-cash flow ratio 10.11 Book Value per share NA Market-to-book ratio 1.72 How has Lan & Chen's LIQUIDITY changed from 2017 to 2018 and in comparision to the industry average? How has Lan & Chen's ASSET MANAGEMENT changed from 2017 to 2018 and in comparision to the industry average? How has Lan & Chen's DEBT MANAGEMENT changed from 2017 to 2018 and in comparision to the industry average? How has Lan & Chen's PROFITABILITY changed from 2017 to 2018 and in comparision to the industry average? How do Lan & Chen's MARKET VALUE ratios compare to the industry average?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Please help me on Ratio Analysis below.
Lan & Chen Technologies: Income Statements for Year Ending December 31 | |||||
(Thousands of Dollars) | 2018 | 2017 | |||
Sales | $945,000 | $900,000 | |||
Expenses excluding depreciation and amortization | 812,700 | 774,000 | |||
EBITDA | $132,300 | $126,000 | |||
Depreciation and amortization | 33,100 | 31,500 | |||
EBIT | $99,200 | $94,500 | |||
Interest Expense | 10,470 | 8,600 | |||
EBT | $88,730 | $85,900 | |||
Taxes (40%) | 35,492 | 34,360 | |||
Net income | $53,238 | $51,540 | |||
Common dividends | $43,300 | $41,230 | |||
Addition to retained earnings | $9,938 | $10,310 | |||
Lan & Chen Technologies: December 31 Balance Sheets | |||||
(Thousands of Dollars) | |||||
Assets | 2018 | 2017 | |||
Cash and cash equivalents | $47,250 | $45,000 | |||
Short-term investments | 3,800 | 3,400 | |||
Accounts Receivable | 283,500 | 269,000 | |||
Inventories | 141,750 | 136,000 | |||
Total current assets | $476,300 | $453,400 | |||
Net fixed assets | 330,750 | 315,000 | |||
Total assets | $807,050 | $768,400 | |||
Liabilities and equity | |||||
Accounts payable | $94,500 | $89,800 | |||
Accruals | 47,250 | 45,000 | |||
Notes payable | 26,262 | 9,000 | |||
Total current liabilities | $168,012 | $143,800 | |||
Long-term debt | 94,500 | 90,000 | |||
Total liabilities | $262,512 | $233,800 | |||
Common stock | 444,600 | 444,600 | |||
Retained Earnings | $99,938 | 90,000 | |||
Total common equity | $544,538 | $534,600 | |||
Total liabilities and equity | $807,050 | $768,400 |
Ratio Analysis | 2018 | 2017 | Industry Avg | ||
|
2.90 | ||||
Quick Ratio | 1.90 | ||||
Asset Management Ratios | |||||
Inventory Turnover (Total COGS/Inventories) | |||||
Days Sales Outstanding | 98.00 | ||||
Fixed Assets Turnover | 2.56 | ||||
Total Assets Turnover | 1.23 | ||||
Debt Management Ratios | |||||
Debt Ratio (Total debt-to-assets) | 20.0% | ||||
Liabilities-to-assets ratio | 32.1% | ||||
Times-interest-earned ratio | 12.33 | ||||
Profitability Ratios | |||||
Profit Margin | 6.25% | ||||
Basic Earning Power | 10.25% | ||||
Return on Assets | 6.75% | ||||
Return on Equity | 9.46% | ||||
Market Value Ratios | |||||
Earnings per share | NA | ||||
Price-to-earnings ratio | 15.65 | ||||
Cash flow per share | NA | ||||
Price-to-cash flow ratio | 10.11 | ||||
Book Value per share | NA | ||||
Market-to-book ratio | 1.72 | ||||
How has Lan & Chen's LIQUIDITY changed from 2017 to 2018 and in comparision to the industry average? | |||||
How has Lan & Chen's ASSET MANAGEMENT changed from 2017 to 2018 and in comparision to the industry average? | |||||
How has Lan & Chen's DEBT MANAGEMENT changed from 2017 to 2018 and in comparision to the industry average? | |||||
How has Lan & Chen's PROFITABILITY changed from 2017 to 2018 and in comparision to the industry average? | |||||
How do Lan & Chen's MARKET VALUE ratios compare to the industry average? | |||||
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Ratio Analysis:
Ratio analysis helps in getting an idea about an entity's operational efficiency, liquidity and profitability using the income statement and balance sheet. The ratio analysis is the fundamental analysis of equity of an entity.
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