Question

Financial statement analysis) Carson Electronics management has long viewed BGT Electronics as an industry leader and uses this firm as a model firm for analyzing its own performance. The balance sheets and income statements for the two firms are found here

Balance Sheet ($000)	Carson Electronics, Inc.	BGT Electronics, Inc
Cash	$1,990	$1,520
Accounts receivable	4,540	5,960
Inventories	1,460	2,500
Current assets	$7,990	$9,980
Net fixed assets	16,000	25,000
Total assets	$23,990	$34,980
Accounts payable	$2,470	$5,030
Accrued expenses	1,010	1,470
Short-term notes payable	3,550	1,510
Current liabilities	$7,030	$8,010
Long-term debt	8,000	3,950
Owners' equity	8,960	23,020
Total liabilities and owners' equity	$23,990	$34,980

Income Statement ($000)	Carson Electronics, Inc	BGT Electronics, Inc.
Net sales (all credit)	$48,000	$70,020
Cost of goods sold	(36,050)	(41,980)
Gross profit	$11,950	$28,040
Operating expenses	(8,030)	(11,970)
Net operating income	$3,920	$16,070
Interest expense	(1,100)	(550)
Earnings before taxes	$2,820	$15,520
Income taxes (35%)	(1,128)	(6,208)
Net income	$1,692	$9,312
Total liabilities and owners' equity

A. Calculate the following ratios for both Carson and BGT.

Current ratio Operating return on assets

Times interest earned                   Debt ratio

Inventory turnover                         Average collection period

Total asset turnover                       Fixed asset turnover

Operating profit margin Return on equity

B. Analyze the differences you observe between the two firms. Comment on what you view as weaknesses in the performance of Carson as compared to BGT that Carson’s management might focus on to improve its operations.

A. Calculate the following ratios for both Carson and BGT:

Carson’s current ratio is _____(Round to two decimal places)

Answer 1

We can calculate the desired results as follows:

A i) Current ratio = Total Current Assets / Total Current Liabilities

Carson Electronics Current ratio = 7,990 / 7,030

= 1.14

BGT Electronics Current ratio = 9,980 / 8,010

= 1.25

ii) Operating return on assets = Net Operating Income / Average Total Assets

Carson Electronics Operating return on assets = 3,920 / 23,990

= 0.1634 or 16.34%

BGT Electronics Operating return on assets = 16,070 / 34,980

= 0.4594 or 45.94%

iii) Times interest earned = Net Operating Income / Interest Expenses

Carson Electronics Times interest earned ratio = 3,920 / 1,100

= 3.56 times

BGT Electronics Times interest earned ratio = 16,070 / 550

= 29.22 times

iv) Debt ratio = Total Liabilities / Total Assets

Carson Electronics Debt ratio = (7,030 + 8,000) / 23,990

= 0.6265 or 62.65%

BGT Electronics Debt ratio = (8,010 + 3,950) / 34,980

= 0.3419 or 34.19%

As there are multiple questions and sub parts asked. I have solved the first 4 sub parts of 1st question . Please post the other parts and questions sepeartely.

Hope it helps !!