Option #1: HH Company Financial Analysis
Using the financial statements for HH Company below:
Sales 1,607,500
Cost of goods sold 1,392,500
Selling, general and administrative 145,000
Earnings before interest and taxes (EBIT) 70,000
Federal and state income taxes (40%) 18,200
Net income 27,300
HH Company Balance Sheet as of December 31, 20XX
Assets
80,500
Accounts Payable
132,000
Accounts Receivable
334,500
Current portion of debt
84,000
Inventories
240,000
Other current liabilities
114,000
Total current assets
655,000
Total current liabilities
330,000
Net fixed assets
292,500
Long-term debt
256,500
Total assets
947,500
Total liabilities
586,500
Common equity
361,000
Total Liabilities Equity
947,500
1. Calculate the indicated ratios for HH.
Company Averages Industry Averages
Current Ratio 2.2
Days sales outstanding (based on 365-day year) 36 days
Inventory turnover 6.7
Fixed asset turnover 12.1
Total assets turnover 3.00
Return on sales 1.20%
Return on assets 3.60%
Return on equity 9.00%
Debt ratio 55%
2. Discuss HH’s strengths and weaknesses as revealed by your analysis.
3. Suppose HH doubles its sales as well as its inventories, accounts receivable, and common equity during the year. How would that information affect the validity of your ratio analysis?
The post Option #1: HH Company Financial Analysis
Using the financial statements for HH C appeared first on Skilled Papers.