Cross- Sectional ratio analysis. Use the financial statement below and on the next page for Fox Manufacturing Company for the year ended December 21,2015, along with the industry average ratios below to do the following:
Prepare and interpret a complete ration analysis of the firm’s 2015 operations
Summarize your findings and make recommendations
Fox Manufacturing Company Income Statement
For the Year Ended December 31, 2015
Sales Revenue $600,000
Less: Cost of goods sold $460,000
Gross profits $140,000
Less: Operating expenses
General and administrative expenses $30,000
Depreciation expense $30,000
Total operating expense 60,000
Operating profits $80,000
Less: Interest expense $10,000
Net Profits before taxes $70,000
Less: Taxes $27,100
Net profits after taxes (Hint: Earnings available for common stockholders as there are no preferred stockholders)
$42,900
Earnings per share (EPS) $2.15
Ratio Industry Average, 2015
Current Ratio 2.35
Quick Ratio 0.87
Inventory turnover 4.55
Average collection period 35.8 days
Total asset turnover 1.09
Debt ratio 0.300
Times interest earned ratio 12.3
Gross profit margin 0.202
Operating profit margin 0.135
Net profit margin 0.091
Return on total assets (ROA) 0.099
Return on common equity (ROE) 0.167
Earnings per share (EPS) $3.10
(Based on a 365-day year and on end-of-year figures)
Fox Manufacturing Company Balance Sheet
December 31, 2015
Assets
Cash $15,000
Marketable securities 7,200
Accounts receivable 34,100
Inventories 82,000
Total current assets $138,300
Net fixed assets 270,000
Total assets $408,300
Liabilities and Stockholders’ Equity
Accounts payable $57,000
Notes payable 13,000
Accruals 5,000
Total current liabilities $75,000
Long-term debt $150,000
Common stock equity
(20,000 shares outstanding) $110,200
Retained earnings 73,100
Total stockholders’ equity $183,300
Total liabilities and stockholders’ equity $408,300