Final financial ratio analysis assignment

  

This term you have learned to understand a company’s financial story using the language of accounting. The recording and reporting of information is essential to decision makers and other users of financial information; numbers on the various financial statements are used to help further understand the financial condition of the business. This process is known as financial ratio analysis and allows us to analyze the company’s financial position in relation to other organizations in the industry. In this final assignment, you will apply the concepts you have learned throughout the term to perform financial statement analysis and to offer some recommendations. 

Assume that you are a health care consultant hired by the Dependable DME Company. DME is Durable Medical Equipment and includes all equipment that benefits patients who have certain medical conditions. The owner of the company, David Smith, is interested in applying for a loan to expand his business; he desires to open a second location in another city. He is preparing to apply to a local bank for a loan. 

The bank will base its decision on the following averages for the DME industry:

  

Ratio

Industry Average

 

Current   ratio

1.50

 

Quick   ratio

0.80

 

Receivables   turnover ratio

18.0

 

Inventory   turnover ratio

20.0

 

Debt   to assets ratio

0.56

 

Profit   margin

10.25%

The balance sheet data for Dependable DME Company follows:

  

December 31, 2017

December 31, 2016

 

Cash

$75,000

$60,000

 

Accounts   receivable

40,000

20,000

 

Inventory

30,000

20,000

 

Prepaid   insurance

5,000

5,000

 

Total current assets

140,000

105,000

 

Property   and equipment

600,000

550,000

 

Accumulated   depreciation

140,000

110,000

 

Total property and equipment

460,000

440,000

 

Total assets

$600,000

$545,000

 

Accounts   payable

$60,000

$60,000

 

Other   current liabilities

40,000

45,000

 

Total current liabilities

100,000

105,000

 

Bonds   payable

150,000

150,000

 

Total liabilities

250,000

255,000

 

Common   stock

250,000

250,000

 

Retained   earnings

100,000

40,000

 

Total stockholders’ equity

350,000

290,000

 

Total liabilities and stockholders’   equity

$600,000

$545,000

The income statement data for Dependable DME Company follows:

  

Sales

$600,000

 

Cost   of goods sold

350,000

 

Gross profit

$250,000

 

Operating   expenses

100,000

 

Operating income

$150,000

 

Interest   expense

25,000

 

Income before taxes

$125,000

 

Income   tax expense

65,000

 

Net   income

$60,000

Required: 

  1. Calculate the following six (6) ratios: Current Ratio, Quick Ratio, Receivables      Turnover Ratio, Inventory Turnover Ratio, Profit Margin Ratio and Debt to Assets      Ratio. Be sure to show the actual calculation as well as your final      answer. 

You are only required to calculate the ratios for 2017; however, for two of the ratios (Receivables Turnover Ratio and Inventory Turnover Ratio), you will need data from 2016 for the formula. When calculating the Quick Ratio, please note that Short-Term Investments are $0 in this scenario. (24 points; 4 points for each ratio calculation)

  1. Below each ratio, comment on the interpretation of      the ratio. In other words, what does the result tell you, specifically? (8      points)
  2. Based upon the industry averages upon which the bank      relies, should they approve the loan to Mr. Smith? Why or why not? (7      points)
  3. In one-half page, comment on what financial aspect      of Dependable DME Company looks good and where can Mr. Smith make some      improvements. Specifically identify at least two recommendations to Mr.      Smith that can be made to improve the financial position of his business.      (8 points)
Get 20% Discount on This Paper
Pages (550 words)
Approximate price: -

Try it now!

Get 20% Discount on This Paper

We'll send you the first draft for approval by at
Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

Paper Helper has assembled a team of highly skilled writers with diverse experience in the online writing circles. Our aim is to become a one stop shop for all your Academic/ online writing. Check out below our amazing service!

Essays

Essay Writing Services

At Paper Helper, we prioritize on all aspects that creates a good grade such as impeccable grammar, proper structure, zero-plagiarism, and conformance to guidelines. The principal purpose of essay writing is to present the author's evaluation concerning a singular subject about which they have made. Since Professionalism is the mother of every success, try our team of experienced writers in helping you complete your essays and other assignments.

Admissions

Admission Papers

You have been trying to join that prestigious institution you long yearned for, but the hurdle of an admission essay has become a stumbling block. We have your back, with our proven team that has gained invaluable experience over time, your chance of joining that institution is now! Just let us work on that essay.How do you write an admission essay? How do you begin the essay? For answers, try Quality Custom Writers Now!

Editing

Editing and Proofreading

Regardless of whether you're pleased with your composing abilities, it's never an impractical notion to have a second eye go through your work. The best editing services leaves no mistake untouched. We recognize the stuff needed to polish up a writing; as a component of our editing and proofreading, we'll change and refine your write up to guarantee it's amazing, and blunder free. Our group of expert editors will examine your work, giving an impeccable touch of English while ensuring your punctuation and sentence structures are top-notch.

Coursework

Technical papers

We pride ourselves in having a team of clinical writers. The stringent and rigorous vetting process ensures that only the best persons for job. We hire qualified PhD and MA writers only. We equally offer our team of writers bonuses and incentives to motivate their working spirit in terms of delivering original, unique, and informative content. They are our resources drawn from diverse fields. Therefore your technical paper is in the right hands. Every paper is assessed and only the writers with the technical know-how in that field get to work on it.

Coursework

College Essay Writing

If all along you have been looking for a trustworthy college essay service provider that provides superb academic papers at reasonable prices, then be glad that you search has ended with us. We are your best choice! Get high-quality college essay writing from our magnificent team of knowledgeable and dedicated writers right now!

Coursework

Quality Assignment/Homework Help

We give the students premium quality assignments, without alarming them with plagiarism and referencing issues. We ensure that the assignments stick to the rules given by the tutors. We are specific about the deadlines you give us. We assure you that you will get your papers well in advance, knowing that you will review and return it if there are any changes, which should be incorporated.