Question

Use information below for questions 7-10 below.

Carolina, Inc. Balance Sheet

Year	2022	2021
Assets
Cash	384	249.7
Receivables	364.5	367.5
Inventories	1070.4	1086.3
Total CA	1818.9	1703.5
Fixed Assets	7738.8	7771.7
Total Assets	9557.7	9475.2
Liabilities and Equity
Payables	387.2	357.6
Other	286.5	319.3
Total CL	673.7	676.9
LT Debt	2084.9	2120.5
Other LT Liabilities	1426.2	1414.4
Total LT Liabilities	3511.1	3534.9
Total Liabilities	4184.8	4211.8
Common Stock	3700	3700
Retained Earnings	1672.9	1563.4
Total Equity	5372.9	5263.4
Total Liabilities and Equity	9557.7	9475.2

Carolina Inc. Income Statement

Year	2022	2021
Total Revenue	6324.6	5925.8
CoGS	4047.9	3830.6
Fixed Costs	1003.3	912.7
Depreciation	180.8	192.9
Operating Income	1092.6	989.6
Interest	255.2	250.8
Income Tax	167.2	176.4
Net Income	670.2	562.4

1. Calculate selected ratios for Carolina (for Year 2022 only) in the table below:

Briefly comment on key aspects of Carolina’s financial performance vs. its competition. Which area(s) may need to be substantially improved and why?

	Carolina	Industry Average
Current Ratio		1.38
Total Debt		42.2%
TA Turnover		0.70
ROA		12.5%

Answer 1

Current Ratio = current assets / current liability

= 1818.9 / 673.7

= 2.7 = 2.7:1

Total debt Ratio = Total Liability / Total Assets

= 4184.8 / 9557.7

= 0.44= 0.44:1

Total Assets Turn over Ratio = Revenue /Avg. TA

Avg Total Assets = (9557.7 + 9475.2)/2 = 9516.45

TA TOR = 6324.6 / 9516.45 = 0.66 = 0.66:1

ROA = Net Income / Total Assets

= 670.2 / 9557.7

= 0.07 = 7%

Current ratio is good as it greator then 2:1 which indicate that firm are able to meet it financial obligation during the year, it has easily meet current obligation.

Total debt ratio is 0.44:1 which indicate that firm use 44 % of debt and 66% of total assets and it tell that how much firm rely on its debt to finance and this ratio is less and it is good ratio.

Total Assets TOR is 0.66:1 which indicate that the higher the asset turnover ratio, the more efficient a company is at generating revenue from its assets. Conversely, if a company has a low asset turnover ratio, it indicates it is not efficiently using its assets to generate sales. ideal ratio is 2.5 so equal and more then ideal ratio is good but is our case ratio is very low so firm are not efficiently using Its assets to generate sales.

Here the company need to improve efficiency to generate revenue from assets.

ROA 7% which is higher . The ROA figure gives investors an idea of how effective the company is in converting the money it invests into net income. The higher the ROA number, the better, because the company is earning more money on less investment.