Question

QUESTION 1

1. The Garvey Company has the following financial statements.

Garvey Company
Balance Sheet
For the period ended 12/31/X1 ($000)
				ASSETS
		12/31/X0			12/31/X1
Cash		$	3547		$	2855
Accounts receivable			6579			5217
Inventory			2573			3220
CURRENT ASSETS		$	12699		$	11292
Fixed assets
Gross		$	22478		$	24360
Accumulated deprec.			(12017)			(12927)
Net		$	10461		$	11433
TOTAL ASSETS		$	23160		$	22725
				LIABILITIES
Accounts payable		$	1577		$	1710
Accruals			233			380
CURRENT LIABILITIES		$	1810		$	2090
Long-term debt		$	7112		$	6002
Equity			14238			14633
TOTAL CAPITAL		$	21350		$	20635
TOTAL LIABILITIES AND EQUITY		$	23160		$	22725

Garvey Company
Income Statement
For the period ended 12/31/X1
($000)
Sales		$	36233
COGS			20315
Gross margin		$	15918
Expense		$	10478
EBIT		$	5440
Interest			713
EBT		$	4727
Tax			1605
Net income		$	3122

3. In addition, Garvey retired stock for $1,000,000 and paid a dividend of $1,727,000. Depreciation for the year was $910,000. Calculate the ratios for the Garvey Company. Assume Garvey had leasing costs of $7,267,000 and amortization of $1,416,000 in 20X1, and had 1268000 shares of stock outstanding that were valued at $28.75 per share at year end. The firm must also make principal repayments of $1,012,000 on its outstanding debt this year. Assume 360 days in a year. Round your answers to two decimal places.

Current Ratio	x
Quick Ratio	x
Average Collection Period (ACP)	days
Inventory Turnover (using COGS)	x
Inventory Turnover (using sales)	x
Fixed Asset Turnover	x
Total Asset Turnover	x
Debt Ratio	%
Debt to Equity Ratio	x
Times Interest Earned (TIE)	x
Cash Coverage	x
Fixed Charge Coverage	x
EBITDA Coverage	x
Return on Sales	%
Return on Assets	%
Return on Equity	%
Price Earnings Ratio (P/E)	x
Market to Book Value Ratio	x

Answer 1

Solution:

Current Ratio : 5.4

Quick Ratio : 3.86

ACP : 59 Days

Inventory Turnover Ratio (Using COGS): 7.01 Times

Inventory Turnover Ratio (Using Sales): 12.51 Times

Fixed Asset Turnover : 1.78 Times

Total Asset Turnover : 0.89 Times

Debt Ratio : 26.41%

Times Interest Earned : 7.63 Times

Debt to Equity Ratio : 0.41 : 1

Cash Coverage : 4 Times

Fixed Charge Coverage & EBITDA Coverage : 1.67

Return On Sales : 8.62%

Return On Assets : 13.74%

Return On Equity : 21.34%

Price Earning Ratio : 2.46

Market to Book Ratio : 2.49