The Jimenez Corporation's forecasted 2014 financial statements follow, along with the some industry average ratios.
Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2014
| Assets |
|
| Cash |
$ 72,000 |
| Accounts receivable |
439,000 |
| Inventories |
894,000 |
| Total current assets |
$1,405,000 |
| Fixed assets |
431,000 |
| Total assets |
$1,836,000 |
| Liabilities and Equity |
|
| Accounts payable |
$ 332,000 |
| Notes payable |
100,000 |
| Accruals |
170,000 |
| Total current liabilities |
$ 602,000 |
| Long-term debt |
404,290 |
| Common stock |
575,000 |
| Retained earnings |
254,710 |
| Total liabilities and equity |
$1,836,000 |
Jimenez Corporation: Forecasted Income Statement for 2014
| Sales |
$4,290,000 |
| Cost of goods sold |
3,580,000 |
| Selling, general, and administrative expenses |
370,320 |
| Depreciation and amortization |
159,000 |
| Earnings before taxes (EBT) |
$ 180,680 |
| Taxes (40%) |
72,272 |
| Net income |
$ 108,408 |
| Per Share Data |
|
| EPS |
$ 4.71 |
| Cash dividends per share |
$ 0.95 |
| P/E ratio |
5.0 |
| Market price (average) |
$ 23.57 |
| Number of shares outstanding |
23,000 |
| Industry Financial Ratios (2013)* |
|
| Quick ratio |
1.0 |
| Current ratio |
2.7 |
| Inventory turnover** |
7.0 |
| Days sales outstanding*** |
32.0 days |
| Fixed assets turn over** |
13.0 |
| Total assets turnover** |
2.6 |
| Return on assets |
9.1% |
| Return on equity |
18.2% |
| Profit margin on sales |
3.5% |
| Debt-to-assets ratio |
21.0% |
| Liabilities-to-assets ratio |
50.0% |
|
|
| P/E ratio |
6.0 |
| Price/Cash flow ratio |
3.5 |
| Market/Book ratio |
3.5 |
| *Industry average ratios have been constant for the past 4 years. |
| **Based on year-end balance sheet figures. |
| ***Calculation is based on a 365-day year. |
Calculate Jimenez's 2014 forecasted ratios, compare them with the industry average data, and comment briefly on Jimenez's projected strengths and weaknesses. Assume that there are no changes from the prior period to any of the operating balance sheet accounts. Round DSO to the nearest whole number. Round the other ratios to one decimal place.
| Ratios |
Firm |
Industry |
Comment |
| Quick ratio |
|
1.0 |
-Select-StrongWeakItem 2 |
| Current ratio |
|
2.7 |
-Select-StrongWeakItem 4 |
| Inventory turnover |
|
7.0 |
-Select-PoorRichItem 6 |
| Days sales outstanding |
days |
32 days |
-Select-PoorRichItem 8 |
| Fixed assets turnover |
|
13.0 |
-Select-PoorRichItem 10 |
| Total assets turnover |
|
2.6 |
-Select-PoorRichItem 12 |
| Return on assets |
% |
9.1% |
-Select-BadGoodItem 14 |
| Return on equity |
% |
18.2% |
-Select-BadGoodItem 16 |
| Profit margin on sales |
% |
3.5% |
-Select-BadGoodItem 18 |
| Debt ratio |
% |
21.0% |
-Select-LowHighItem 20 |
| Liabilities-to-assets |
% |
50.0% |
-Select-LowHighItem 22 |
| EPS |
$4.71 |
n.a. |
-- |
| Stock Price |
$23.57 |
n.a. |
-- |
| P/E ratio |
|
6.0 |
-Select-PoorRichItem 24 |
| P/CF ratio |
|
3.5 |
-Select-PoorRichItem 26 |
| M/B ratio |
|
n.a. |
-- |
So, the firm appears to be -Select-badlywellItem 28 managed