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Ratio Analysis
The Vanguard Group, Inc. has compiled the following financial statements and comparative financial
ratios for the year-end review.
Balance Sheet
Vanguard Group, Inc.
December 31, 2007
Assets
Current assets
Cash $ 118,750
Accounts receivable 296,250
Inventory 303,750
Total current assets $ 718,750
Gross fixed assets $625,000
Less: Accumulated depreciation 93,750
Net fixed assets 531,250
Total assets $1,250,000
Liabilities and stockholders’ equity
Current liabilities
Accounts payable $ 111,250
Notes payable 211,250
Accruals 108,750
Total current liabilities $ 431,250
Long-term debt 235,000
Total liabilities $ 666,250
Stockholders’ equity
Common stock 318,750
Retained earnings 265,000
Total stockholders’ equity $ 583,750
Total liabilities and stockholders’ equity $1,250,000
Income Statement
Vanguard Group, Inc.
for the Year Ended December 31, 2007
Sales revenue $1,680,000
Cost of sales 1,362,480
Gross profits $ 317,520
Less: Operating expenses
Selling expense $ 125,600
General and administrative expense 81,600
Depreciation expense 24,000
Total operating expense $231,200
Operating profits $ 86,320
Less: Interest expense 15,600
Net profits before taxes $ 70,720
Less: Taxes (40%) 28,288
Net profits after taxes $ 42,432
Historical and Industry Average Ratios
Vanguard Group, Inc.
Industry Average
Ratio 2005 2006 2007 2007
Current ratio 1.6 1.7 — 1.6
Quick ratio 0.9 1.0 — 0.9
Inventory turnover 6.0 5.0 — 8.4
Average collection period 40 days 50 days — 40 days
Total asset turnover 1.5 1.5 — 1.75
Debt ratio 60% 56% — 50%
Times interest earned 2.5 3.5 — 4.0
Gross profit margin 20% 19.7% — 20%
Operating profit margin 4.7% 4.8% — 6%
Net profit margin 2.0% 2.3% — 3%
Return on investment 3.0% 3.5% — 5.25%
Return on equity 7.5% 7.95% — 10.5%
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Ratio Analysis
The Vanguard Group, Inc. has compiled the following financial
statements and comparative financial
ratios for the year-end review.
Balance Sheet
Vanguard Group, Inc.
December 31, 2007
Assets
Current assets
Cash $ 118,750
Accounts receivable 296,250
Inventory 303,750
Total current assets $ 718,750
2. Gross fixed assets $625,000
Less: Accumulated depreciation 93,750
Net fixed assets 531,250
Total assets $1,250,000
Liabilities and stockholders’ equity
Current liabilities
Accounts payable $ 111,250
Notes payable 211,250
Accruals 108,750
Total current liabilities $ 431,250
Long-term debt 235,000
Total liabilities $ 666,250
Stockholders’ equity
Common stock 318,750
Retained earnings 265,000
Total stockholders’ equity $ 583,750
Total liabilities and stockholders’ equity $1,250,000
Income Statement
Vanguard Group, Inc.
for the Year Ended December 31, 2007
Sales revenue $1,680,000
Cost of sales 1,362,480
Gross profits $ 317,520
Less: Operating expenses
Selling expense $ 125,600
General and administrative expense 81,600
Depreciation expense 24,000
3. Total operating expense $231,200
Operating profits $ 86,320
Less: Interest expense 15,600
Net profits before taxes $ 70,720
Less: Taxes (40%) 28,288
Net profits after taxes $ 42,432
Historical and Industry Average Ratios
Vanguard Group, Inc.
Industry Average
Ratio 2005 2006 2007 2007
Current ratio 1.6 1.7 — 1.6
Quick ratio 0.9 1.0 — 0.9
Inventory turnover 6.0 5.0 — 8.4
Average collection period 40 days 50 days — 40 days
Total asset turnover 1.5 1.5 — 1.75
Debt ratio 60% 56% — 50%
Times interest earned 2.5 3.5 — 4.0
Gross profit margin 20% 19.7% — 20%
Operating profit margin 4.7% 4.8% — 6%
Net profit margin 2.0% 2.3% — 3%
Return on investment 3.0% 3.5% — 5.25%
Return on equity 7.5% 7.95% — 10.5%
