1. Use the provided worksheet to calculate a set of ratios.
2. Complete the financial ratios for the company in the 2014 column.
Calculate the financial ratios below for the year 2014. Use the financial information given in the income statement and balance sheet below.
Industry Average
Financial Ratios 2012 2013 2014 2007
Current ratio 1.71X 1.65X 1.70X
Quick ratio .92X .89X .95X
Average collection period .92X 60 days 65 days
Average collection period 4.20X 3.90X 4.50X
Fixed asset turnover 3.20X 3.33X 3.00X
Total asset turnover 1.40X 1.35X 1.37X
Debt ratio 59.20% 61.00% 60.00%
Times interest earned 4.20X 3.70X 4.75X
Gross profit margin 25.00% 23.00% 22.50%
Operating profit margin 12.50% 12.70% 12.50%
Net profit margin 6.10% 6.00% 6.50%
Return on total assets 8.54% 8.10% 6.50%
Return on equity 20.93% 20.74% 22.28%
Income Statement for Balance Sheet
Year Ended 12/31/14 at 12/31/14
Sales $1,500,000 Cash $125,000
Cost of goods sold 1,200,000 Accounts receivable 275,000
Gross Profit $300,000 Inventory 325,000
Operating expenses 100,000 Current Assets $725,000
Operating profit $200,000 Fixed assets (net) $420,000
Interest expense 72,000 Total Assets $1,145,000
Earnings before tax 128,000 Accounts payable $150,000
Income tax (0.4) 51,200 Notes payable 225,000
Accrued liabilities 100,000
Current Liabilities 475,000
Long-term debt 400,000
Total Liabilities $875,000
Equity 270,000
Net Income $ 76,800 Total Liabilities & Equity $1,145,000