Problem:
A. Analyze Ryan Boot Company, using ratio analysis. Compute the ratios.
B. In your analysis, calculate the overall break-even point in sales dollars and the cash break-even point.
|
Ryan Boot Company
Analysis Ratios
|
|
|
|
Ryan Boot
|
Industry
|
|
Profit margin
|
$292,500 ÷ 7,000,000
|
4.18%
|
5.75%
|
|
Return on assets
|
$292,500 ÷ 8,130,000
|
3.60%
|
6.90%
|
|
Return on equity
|
$292,500 ÷ 2,880,000
|
10.16%
|
9.20x
|
|
Receivables turnover
|
$7,000,000 ÷ 3,000,000
|
2.33x
|
4.35x
|
|
Inventory turnover
|
$7,000,000 ÷ 1,000,000
|
7.00x
|
6.50x
|
|
Fixed asset turnover
|
$7,000,000 ÷ 4,000,000
|
1.75x
|
1.85x
|
|
Total asset turnover
|
$7,000,000 ÷ 8,130,000
|
0.86x
|
1.20x
|
|
Current ratio
|
$4,130,000 ÷ 2,750,000
|
1.50x
|
1.45x
|
|
Quick ratio
|
$3,130,000 ÷ 2,750,000
|
1.14x
|
1.10x
|
|
Debt to total assets
|
$5,250,000 ÷ 8,130,000
|
64.58%
|
25.05%
|
|
Interest coverage
|
$700,000 ÷ 250,000
|
2.80x
|
5.35x
|
|
Fixed charge coverage
|
($700,000 + $200,000)/$250,000 + $200,000 + ($65,000/ (1-.35) = $900,000/$550,000
|
1.64x
|
4.62x
|
A. Analyze Ryan Boot Company, using ratio analysis. Compute the ratios.
B. In your analysis, calculate the overall break-even point in sales dollars and the cash break-even point.
Answer:
B. BEP in sales dollars
First we must calculate the contribution margin.
CM = Sales - Variable expenses
CM = $7,000,000 - 4,200,000
CM = $2,800,000
Contribution Margin Ratio = CM ÷ Sales
CMR = $2,800,000 ÷ 7,000,000
CMR = 40%
BEP = Total Fixed Assets ÷ CMR
BEP = $2,100,000 ÷ 40%
BEP = $5,250,000 in sales dollars
Cash BEP = same as above accept the non cash expenses would be removed from the fixed assets per the instructor help.
Cash BEP = (TFA - Non Cash expenses) ÷ CMR
Cash BEP = ($2,100,000 - 500,000) ÷ 40%
Cash BEP = $1,600,000 ÷ 40%
Cash BEP = $4,000,000
Problem:
A. Analyze Ryan Boot Company, using ratio analysis. Compute the ratios.
B. In your analysis, calculate the overall break-even point in sales dollars and the cash break-even point.
|
Ryan Boot Company
Analysis Ratios
|
|
|
|
Ryan Boot
|
Industry
|
|
Profit margin
|
$292,500 ÷ 7,000,000
|
4.18%
|
5.75%
|
|
Return on assets
|
$292,500 ÷ 8,130,000
|
3.60%
|
6.90%
|
|
Return on equity
|
$292,500 ÷ 2,880,000
|
10.16%
|
9.20x
|
|
Receivables turnover
|
$7,000,000 ÷ 3,000,000
|
2.33x
|
4.35x
|
|
Inventory turnover
|
$7,000,000 ÷ 1,000,000
|
7.00x
|
6.50x
|
|
Fixed asset turnover
|
$7,000,000 ÷ 4,000,000
|
1.75x
|
1.85x
|
|
Total asset turnover
|
$7,000,000 ÷ 8,130,000
|
0.86x
|
1.20x
|
|
Current ratio
|
$4,130,000 ÷ 2,750,000
|
1.50x
|
1.45x
|
|
Quick ratio
|
$3,130,000 ÷ 2,750,000
|
1.14x
|
1.10x
|
|
Debt to total assets
|
$5,250,000 ÷ 8,130,000
|
64.58%
|
25.05%
|
|
Interest coverage
|
$700,000 ÷ 250,000
|
2.80x
|
5.35x
|
|
Fixed charge coverage
|
($700,000 + $200,000)/$250,000 + $200,000 + ($65,000/ (1-.35) = $900,000/$550,000
|
1.64x
|
4.62x
|
A. Analyze Ryan Boot Company, using ratio analysis. Compute the ratios.
B. In your analysis, calculate the overall break-even point in sales dollars and the cash break-even point.
Answer:
B. BEP in sales dollars
First we must calculate the contribution margin.
CM = Sales - Variable expenses
CM = $7,000,000 - 4,200,000
CM = $2,800,000
Contribution Margin Ratio = CM ÷ Sales
CMR = $2,800,000 ÷ 7,000,000
CMR = 40%
BEP = Total Fixed Assets ÷ CMR
BEP = $2,100,000 ÷ 40%
BEP = $5,250,000 in sales dollars
Cash BEP = same as above accept the non cash expenses would be removed from the fixed assets per the instructor help.
Cash BEP = (TFA - Non Cash expenses) ÷ CMR
Cash BEP = ($2,100,000 - 500,000) ÷ 40%
Cash BEP = $1,600,000 ÷ 40%
Cash BEP = $4,000,000