Question

The balance sheet and income statement shown below are for Pettijohn Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

Balance Sheet (Millions of $)
					2012
Assets
Cash and securities				$	1,554.0
Accounts receivable					9,660.0
Inventories					13,440.0
Total current assets				$24,654.0
Net plant and equipment					17,346.0
Total assets				$42,000.0
Liabilities and Equity
Accounts payable				$	7,980.0
Notes payable					5,880.0
Accruals					4,620.0
Total current liabilities				$18,480.0
Long-term bonds					10,920.0
Total debt				$29,400.0
Common stock					3,360.0
Retained earnings					9,240.0
Total common equity				$12,600.0
Total liabilities and equity				$42,000.0
Income Statement (Millions of $)					2012
Net sales				$58,800.0
Operating costs except depr'n				$54,978.0
Depreciation				$	1,029.0
Earnings bef int and taxes (EBIT)				$	2,793.0
Less interest					1,050.0
Earnings before taxes (EBT)				$	1,743.0
Taxes				$	610.1
Net income				$	1,133.0
Other data:
Shares outstanding (millions)					175.00
Common dividends				$	509.83
Int rate on notes payable & L-T bonds					6.25%
Federal plus state income tax rate					35%
Year-end stock price					$77.69

Required:

1. What is the firm's current ratio?
2. What is the firm's quick ratio?
3. What are the firm’s days sales outstanding? Assume a 360-day year for this calculation.
4. What is the firm's total assets turnover?
5. What is the firm's inventory turnover ratio?
6. What is the firm's ROA?
7. What is the firm's ROE?
8. What is the firm's net profit margin?
9. Analyze the company performance.

Answer 1

A) Current ratio of 2012= Current asset/ current liabilities

= 24,654 / 18,480

= 1.33 times

B) Quick ratio of 2012= Current asset- inventory/ current liabilities

= 24,654 - 13,440 / 18,480

= 11,214 / 18,480

= 0.61 times

C) Days sales outstanding = Accounts receivable/ sales × 360

= 9,660 / 58,800 × 360

= 0.1643 × 360

= 59.14 days

D) Total asset turnover = Net sales / Total assets

= 58,800 / 42,000

= 1.4

E) Inventory turnover = COGS/ inventory

= 54,978 / 13,440

= 4.09

F) ROA = net income/ Total assets

= 1,133 / 42,000

= 0.0270 or 2.70%

G) ROE = net income/ Total equity

= 1,133 / 12,600

= 8.99%

H) Net profit margin = net profit / sales

= 1,133 / 58,800

= 1.93%