Assignment
Use the following to answer questions 1-15:
The financial statements of Benedict Inc. are given below:
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Benedict Inc. Company
Income Statement (2017)
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Sales
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$8,000,000
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Cost of goods sold
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5,260,000
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Gross profit
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2,740,000
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Selling and administrative expenses
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1,350,000
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Depreciation
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150,000
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Operating profit
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1,240,000
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Interest expenses
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140,000
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Income before tax
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1,100,000
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Tax expense
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440,000
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Net income
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$660,000
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Balance Sheet
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2017 2016
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Cash
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$200,000 $50,000
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Accounts receivable
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1,200,000 950,000
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Inventory
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1,840,000 1,500,000
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Total current assets
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3,240,000 2,500,000
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Fixed assets
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3,200,000 3,000,000
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Total assets
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$6,440,000 $5,500,000
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Accounts payable
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800,000 720,000
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Bank loan
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600,000 100,000
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Total current liabilities
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1,400,000 820,000
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Bonds payable
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900,000 1,000,000
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Total liabilities
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2,300,000 1,820,000
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Common stock (130,000 shares)
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300,000 300,000
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Retained earnings
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3,840,000 3,380,000
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Total liabilities & equity
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$6,440,000 $5,500,000
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Note: The common shares are trading in the stock market for $40 each.
1. The firm's current ratio for 2017 is .
2. The firm's quick ratio for 2017 is .
3. The firm's gross margin for 2017 is .
4. The firm's interest coverage ratio for 2017 is .
5. The firm's average collection period for 2017 is .
6. The firm's inventory turnover ratio for 2017 is .
7. The firm's asset turnover ratio for 2017 is .
8. The firm's financial leverage ratio for 2017 is .
9. The firm's profit margin ratio for 2017 is percent.
10. The firm's return on equity ratio for 2017 is .
11. The firm's return on assets ratio for 2017 is .
12. The firm's P/E ratio for 2017 is .
13. The firm's market to book value ratio for 2017 is .
14. The firm's price to sales ratio for 2017 is .
15. The firm's P/E to growth (PEG) ratio for 2017 is .
(Analysts' expect the firm's EPS to grow at a 5% CAGR for the next five years.
16. The firm's Enterprise value (EV)/EBITDA ratio for 2017 is .
17. Calculate the firm's return on equity (ROE) using the DuPont identity.
18. The Zodiac Co. recently hired your firm to improve the company's performance.
It has been highly profitable but has been experiencing cash shortages due to its high growth rate. As one part of your analysis, you want to determine the firm's cash conversion cycle.
Using the following information and a 365-day year, what is the firm's present cash conversion cycle?
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Inventory =
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$75,000
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Annual sales =
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$600,000
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Annual cost of goods sold =
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$360,000
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Accounts receivable =
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$160,000
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Accounts payable =
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$25,000
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19. Brooks Bros. has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle?
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Annual sales =
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$45,000
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Annual cost of goods sold =
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$31,500
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Inventory =
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$4,000
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Accounts receivable =
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$2,000
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Accounts payable =
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$2,400
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20. 7/11 Inc. has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle?
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Annual sales =
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$45,000
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Annual cost of goods sold =
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$30,000
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Inventory =
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$4,500
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Accounts receivable =
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$1,800
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Accounts payable =
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$2,500
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