Question

Question

C Company’s forecasted 2020 financial statements are given below, along with industry average ratios.                                                                                    

C Company: Forecasted Balance sheet as of December 31, 2020

Cash	72,000
Accounts Receivable	439,000
Inventories	894,000
Total Current Assets	1,405,000
Land and Buildings	238,000
Machinery	132,000
Other Fixed assets	61,000
Total Assets	,1,836,000
Equity & Liabilities
Accounts and Notes Payable	432,000
Accrued liabilities	170,000
Total Current liabilities	602,000
Long term Debt	404,290
Common stock	575,000
Retained earnings	254,710
Total Equity & Liabilities	1,836,000

C Company: Forecasted Income Statement for the year ended December 31, 2020

Sales	4,290,000
Cost of goods sold	3,580,000
Gross profit	710,000
General Selling and Admin Expenses	236,320
Depreciation	159,000
Other Expenses	134,000
Profit before Tax	180,680
Taxes 40%	72,272
Profit after tax	108,408

Per Share data            

EPS                                                                                                     4.71

DPS                                                                                                     .95

Market Price Per Share                                                                       23.57

P/E Ratio                                                                                             5 times

Total No. of Shares                                                                             23,000

Industry Average Ratios - 2020

Current Ratio	2.7
Inventory Turnover	7 times
Average Collection Period	32 days
Total Asset turnover	2.6 times
Debt Ratio	50%
Profit Margin on Sales	3.5%

Required: Calculate C Company’s forecasted Ratios, compare them the industry average data and comment briefly on strength and weaknesses of the company.

Answer 1