FIN 571 Week 2 Individual Assignment Ratio Analysis Problems

You may use excel or word.doc format for this assignment.

Please post your homework as a word.doc or excel file in the class discussion section below by the due date.

1. Analysis of cost of goods sold problem.
1992 1993 1994
Gross Profit Margin 60% 55% 51%
What is happening to cost of goods sold? As was done in the week 2 online lecture on ratio analysis, please assume sales of 1 dollar each year as you do your analysis. This problem follows the process shown in the Week 2 Ratio Analysis online lecture section titled: "Another Income Statement Analytical Approach: Percent of Sales" (5 points).

2. Overhead (or Sales, General and Administrative Expense) problem.

1992 1993 1994
Gross Profit Margin 40% 39% 41%
Operating Margin (NOI/Sales) 15% 10% 5%

What is happening to S,G and A (or overhead expenses)? Please set up an illustration assuming sales of 1.00 dollar each year just as you did in problem number one. (5 points)

3. Balance Sheet Problem

1992 1993 1994
Annual Sales Growth (over prior yr) + 1% 0% +1%
Current Ratio 3.5X 2X 1.2X
Average Collection Period 25 days 30 days 55 days

What is happening to liquidity? Why? What are some follow-up questions you would ask? (5 points)

4. Using the data provided below, which is the better managed company? Why? Please support your answers by calculating appropriate ratios. (5 points)

Company A Company B
Sales 10 million dollars 20 million dollars
Net Income 1 million dollars 2 million dollars
Total Assets 10 million dollars 15 million dollars

Click the Assignment Files tab to submit your assignment.
Powered by