Question

Comprehensive Ratio Analysis The Jimenez Corporation's forecasted 2019 financial statements follow, along with some industry average ratios. Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2019 Assets Cash $    68,000 Accounts receivable 439,000 Inventories 898,000   Total current assets $1,405,000 Fixed assets 431,000 Total assets $1,836,000 Liabilities and Equity Accounts payable $   332,000 Notes payable    118,000 Accruals 152,000   Total current liabilities $   602,000 Long-term debt 403,750 Common stock 575,540 Retained earnings 254,710 Total liabilities and equity $1,836,000 Jimenez Corporation: Forecasted Income Statement for 2019 Sales $4,290,000 Cost of goods sold (excluding depreciation) 3,580,000 Selling, general, and administrative expenses 379,320 Depreciation 150,000   Earnings before taxes (EBT) $   180,680 Taxes (40%) 72,272 Net income $   108,408 Jimenez Corporation: Per Share Data for 2019 EPS $        4.71 Cash dividends per share $        0.95 P/E ratio 4.0 Market price (average) $      18.85 Number of shares outstanding 23,000 Industry Ratiosa Quick ratio 1.0 Current ratio 2.7 Inventory turnoverb 7.0 Days sales outstandingc 32.0 days Fixed assets turnoverb 13.0 Total assets turnoverb 2.6 Return on assets 9.1 % Return on equity 18.2 % Profit margin on sales 3.5 % Debt-to-assets ratio 21.0 % Liabilities-to-assets ratio 50.0 % P/E ratio 5.0 Price/Cash flow ratio 3.5 Market/Book ratio 3.5 Notes: aIndustry average ratios have been stable for the past 4 years. bBased on year-end balance sheet figures. cCalculation is based on a 365-day year. Calculate Jimenez's 2019 forecasted ratios, compare them with the industry average data, and comment briefly on Jimenez's projected strengths and weaknesses. Assume that there are no changes from the prior period to any of the operating balance sheet accounts. Do not round intermediate calculation. Round DSO to the nearest whole number. Round the other ratios to one decimal place. Ratios Firm Industry Comment Quick ratio 1.0 -Select-StrongWeakItem 2 Current ratio 2.7 -Select-StrongWeakItem 4 Inventory turnover 7.0 -Select-PoorHighItem 6 Days sales outstanding days 32 days    -Select-PoorHighItem 8 Fixed assets turnover 13.0   -Select-PoorHighItem 10 Total assets turnover 2.6 -Select-PoorHighItem 12 Return on assets %    9.1% -Select-BadGoodItem 14 Return on equity % 18.2% -Select-BadGoodItem 16 Profit margin on sales %   3.5% -Select-BadGoodItem 18 Debt ratio % 21.0% -Select-LowHighItem 20 Liabilities-to-assets % 50.0% -Select-LowHighItem 22 EPS $4.71 n.a. -- Stock Price $23.57 n.a. -- P/E ratio 5.0 -Select-PoorHighItem 24 Price/Cash flow ratio 3.5 -Select-PoorHighItem 26 Market/Book ratio 3.5 -Select-PoorHighItem 28 So, the firm appears to be -Select- managed. The "Comment" section column is blank.

Answer 1

Ratios	Computation	Firm	Industry	Comment (Each compared to industry average,)
Quick ratio = Quick assets / current liabilities	(68000 + 439000 )/ 602000	0.8	1.0	Weak
Current ratio = Current assets / current liabilities	1405000/602000	2.3	2.7	weak
Inventory turnover = Cogs / Average inventory	3580000 / 898000	4 times	7.0	Poor
Days sales outstanding = 365 / Inventory turnover	365 / 4	91 days	32 days	Poor
Fixed assets turnover = Sales / Average fixed assets	4290000 / 431000	9.9	13.0	Poor
Total assets turnover= Sales / Average Total assets	4290000 / 1836000	2.3	2.6	Poor
Return on assets = net income / Total assets	108408/1836000	5.9%	9.1%	Bad
Return on equity =Net income / Average equity	108408/(575540+254710)	13.1%	18.2%	Bad
Profit margin on sales = Net income / Sales	108408/4290000	2.5%	3.5%	Bad
Debt ratio = long Debt / total assets	403750 / 1836000	22.0%	21.0%	High
Liabilities-to-assets = Total liability / Total assets	(602000+403750) / 1836000	54.8%	50.0%	High
EPS		$4.71	n.a.	--
Stock Price		$23.57	n.a.	--
P/E ratio = Market price / EPS	23.57 / 4.71	$5.0	5.0	Poor
Price/Cash flow ratio = Market price / Cash flow per share*	23.57/11.23	2.1	3.5	Poor
Market/Book ratio = Market price / Book value*	23.57 / 36.09	0.6	3.5	Poor

Cash flow per share* = operating cash flow = Net income + depreciation = 108408 + 150000 = 258408

Number of share = 23000

Cash flow per share = 258408 / 23000 = 11.23

*Book value per share = Book value / number of share = (575540+254710) / 23000 = 830250 / 23000 = 36.09