Question

Axtel Company has the following financial statements.

Axtel Company
Balance Sheet
For the period ended 12/31/X1 ($000)
				ASSETS
		12/31/X0			12/31/X1
Cash		$	3463		$	2909
Accounts receivable			6548			5906
Inventory			2573			3220
CURRENT ASSETS		$	12584		$	12035
Fixed assets
Gross		$	22478		$	24360
Accumulated deprec.			(11902)			(13670)
Net		$	10576		$	10690
TOTAL ASSETS		$	23160		$	22725
				LIABILITIES
Accounts payable		$	1581		$	1692
Accruals			260			393
CURRENT LIABILITIES		$	1841		$	2085
Long-term debt		$	7112		$	6002
Equity			14207			14638
TOTAL CAPITAL		$	21319		$	20640
TOTAL LIABILITIES AND EQUITY		$	23160		$	22725

Axtel Company
Income Statement
For the period ended 12/31/X1
($000)
Sales		$	36269
COGS			19717
Gross margin		$	16552
Expense		$	11076
EBIT		$	5476
Interest			713
EBT		$	4763
Tax			1605
Net income		$	3158

In addition, Axtel retired stock for $1,000,000 and paid a dividend of $1,727,000. Depreciation for the year was $1,768,000. Calculate the ratios for the Axtel Company. Assume Axtel 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
Quick Ratio
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
Times Interest Earned (TIE)	x
Cash Coverage
Fixed Charge Coverage	x
EBITDA Coverage	x
Return on Sales	%
Return on Assets	%
Return on Equity	%
Price Earnings Ratio (P/E)
Market to Book Value Ratio

Answer 1

Current Ratio: Its current assets divided by current liabilities.

= 12035/2085 = 5.77. It shows the company's ability to pay off current liabilities by using current assets. Anything more than 1.5 or 2 is very good indicator for the firm. As it tells us that the firm is healthy enough in assets to pay off current liabilities if they call it.

Quick ratio: Its a acid test ratio for the firm where it indicates the company's ability to pay off current liabilities with its most liquid assets. In quick ratio we will consider cash and cash equivalents, marketable securities and account receivable.

= (2909+5906)/2085

= 4.23 is the answer for quick ratio.

Average collection period - days: for this we will first find the average receivable turnover ratio

Average receivable turnover ratio = Sales / Average account receivable

= 36269/ ((6548+5906)/2)

= 36269/6227

= 5.82

We will now divide 360 by average receivable turnover ratio

= 360/5.82

= 61.85 is the average collection period in days. It tells us the average no of days a customer takes to pay us for the sale we have done with them.

Inventory turnover ratio - using COGS is calculated as Cost of Goods sold divided by average inventory

= 19717/((2573+3220)/2)

= 19717/2896.5

= 6.63 It is the efficiency ratio which tells us the no of times the company has sold average inventory during the year.

Inventory turnover ratio - using Sales is calculated as Sales divided by average inventory

= 36269/((2573+3220)/2)

= 36269/2896.5

= 12.52 It is the efficiency ratio which tells us the no of times the company has sold average inventory during the year.