Assignment 3: Ratio Analysis By the due date assigned solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance. Turn in your completed work to the Submissions Area through the end of the day. Balance Sheet as of December 31, 2010 Gary and Company Cash   $45 Accounts payables   $45 Receivables     66 Notes payables  45 Inventory 159 Other current liabilities  21 Marketable securities 33 Total current liabilities $111 Total current assets  $303 Net fixed assets   147 Long Term Liabilities Total Assets   $450 Long-term debt   24 Total Liabilities  $135 Owners Equity Common stock $114 Retained earnings 201 Total stockholders’ equity 315 Total liabilities and equity $450 Income Statement Year 2010 Net sales $795 Cost of goods sold  660 Gross profit   135 Selling expenses   73.5 Depreciation 12 EBIT 49.5 Interest expense   4.5 EBT 45 Taxes (40%)   18 Net income 27 1. Calculate the following ratios AND interpret the result against the industry average: Ratio Your Answer Industry Average Your Interpretation (Good-Fair-Low-Poor) Profit margin on sales 3% Return on assets 9% Receivable turnover 16X Inventory turnover 10X Fixed asset turnover 2X Total asset turnover 3X Current ratio 2X Quick ratio 1.5X Times interest earned 7X 2. Analysis: Give your interpretation of what the ratios calculations show and how the business can use this information to improve its performance. Justify all answers. Assignment 4 Grading Criteria Maximum Points Has correctly calculated the ratios. 40 Has correctly analyzed and interpreted the significance of the resulting ratios and suggested actions for improvement. 40 Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; displayed accurate spelling, grammar, and punctuation 20 Total: 100 ...

1. Assignment 3: Ratio Analysis
By the due date assigned solve the problem below, calculate the
ratios, interpret the results against the industry average, and fill
in the table on the worksheet. Then, provide an analysis of how
those results can be used by the business to improve its
performance. Turn in your completed work to the Submissions
Area through the end of the day.
Balance Sheet as of December 31, 2010
Gary and Company
Cash
$45
Accounts payables
$45
Receivables
66

2. Notes payables
45
Inventory
159
Other current liabilities
21
Marketable securities
33
Total current liabilities

3. $111
Total current assets
$303
Net fixed assets
147
Long Term Liabilities
Total Assets

4. $450
Long-term debt
24
Total Liabilities
$135

5. Owners Equity
Common stock
$114
Retained earnings
201

6. Total stockholders’ equity
315
Total liabilities and equity
$450
Income Statement Year 2010

7. Net sales
$795
Cost of goods sold
660
Gross profit
135
Selling expenses
73.5
Depreciation
12
EBIT

8. 49.5
Interest expense
4.5
EBT
45
Taxes (40%)
18
Net income
27
1. Calculate the following ratios AND interpret the result
against the industry average:

9. Ratio
Your Answer
Industry Average
Your Interpretation
(Good-Fair-Low-Poor)
Profit margin on sales
3%
Return on assets
9%

10. Receivable turnover
16X
Inventory turnover
10X
Fixed asset turnover
2X

11. Total asset turnover
3X
Current ratio
2X
Quick ratio
1.5X

12. Times interest earned
7X
2. Analysis:
Give your interpretation of what the ratios calculations show
and how the business can use this information to improve its
performance. Justify all answers.
Assignment 4 Grading Criteria
Maximum Points
Has correctly calculated the ratios.
40
Has correctly analyzed and interpreted the significance of the
resulting ratios and suggested actions for improvement.

13. 40
Wrote in a clear, concise, and organized manner; demonstrated
ethical scholarship in accurate representation and attribution of
sources; displayed accurate spelling, grammar, and punctuation
20
Total:
100