Homework Helper
$17/per page/
Financial statement analysis The financial statements of Zach Industries for the year ended December 31, 2003, follow.
|
Zach Industries |
|
|
Sales revenue |
$160,000 |
|
Less: Cost of goods sold |
106,000 |
|
Gross profits |
$54,000 |
|
Less: Operating expenses |
 |
|
Selling expense |
$16,000 |
|
General and administrative expenses |
10,000 |
|
Lease expense |
1,000 |
|
Depreciation expense |
10,000 |
|
Total operating expense |
$37,000 |
|
Operating profits |
$17,000 |
|
Less: Interest expense |
6,100 |
|
Net profits before taxes |
$10,900 |
|
Less: Taxes |
4,360 |
|
Net profits after taxes |
$6,540 |
Â
|
Zach Industries |
|
|
Assets |
 |
|
Cash |
$500 |
|
Marketable securities |
1,000 |
|
Accounts receivable |
25,000 |
|
Inventories |
45,500 |
|
Total current assets |
$72,000 |
|
Land |
$26,000 |
|
Buildings and equipment |
90,000 |
|
Less: Accumulated depreciation |
38,000 |
|
Net fixed assets |
$78,000 |
|
Total assets |
$150,000 |
|
Liabilities and Stockholders’ Equity |
 |
|
Accounts payable |
$22,000 |
|
Notes payable |
47,000 |
|
Total current liabilities |
$69,000 |
|
Long-term debt |
$22,950 |
|
Common stocka |
$31,500 |
|
Retained earnings |
$26,500 |
|
Total liabilities and stockholders’ equity |
$150,000 |
a. Use the preceding financial statements to complete the following table. Assume that the industry averages given in the table are applicable for both 2002 and 2003.
|
 |
Industry |
 |
 |
|
Ratio |
average |
Actual 2002 |
Actual 2003 |
|
Current ratio |
1.80 |
1.84 |
______ |
|
Quick ratio |
0.70 |
0.78 |
______ |
|
Inventory turnovera |
2.50 |
2.59 |
______ |
|
Average collection perioda |
37 days |
36 days |
______ |
|
Debt ratio |
65% |
67% |
______ |
|
Times interest earned ratio |
3.8 |
4.0 |
______ |
|
Gross profit margin |
38% |
40% |
______ |
|
Net profit margin |
3.5% |
3.6% |
______ |
|
Return on total assets |
4.0% |
4.0% |
______ |
|
Return on common equity |
9.5% |
8.0% |
______ |
|
Market/book ratio |
1.1 |
1.2 |
______ |
b. Analyze Zach Industries’ financial condition as it is related to (1) liquidity, (2) activity, (3) debt, (4) profitability, and (5) market. Summarize the company’s overall financial condition.