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. a.  Calculate the following ratios for both Carson and​ BGT: Current ratio Times interest earned Inventory turnover Total asset turnover Operating profit margin Operating return on assets Debt ratio Average collection period Fixed asset turnover 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 nothing. ​(Round to two decimal​ places.)

Carson​ Electronics, Inc. Balance Sheet​ ($000)			BGT​ Electronics, Inc. Balance Sheet​ ($000)
Cash		$ 1 comma 950$1,950			$ 1 comma 510$1,510
Accounts receivable		4 comma 4904,490			6 comma 0206,020
Inventories		1 comma 5301,530			2 comma 5002,500
Current assets		$ 7 comma 970$7,970			$ 10 comma 030$10,030
Net fixed assets		15 comma 98015,980			24 comma 98024,980
Total assets		$ 23 comma 950$23,950			$ 35 comma 010$35,010
Accounts payable		$ 2 comma 550$2,550			$ 4 comma 990$4,990
Accrued expenses		1 comma 0101,010			1 comma 5501,550
​Short-term notes payable		3 comma 4603,460			1 comma 5101,510
Current liabilities		$ 7 comma 020$7,020			$ 8 comma 050$8,050
​Long-term debt		7 comma 9707,970			3 comma 9903,990
​Owners' equity		8 comma 9608,960			22 comma 97022,970
Total liabilities and​ owners' equity		$ 23 comma 950$23,950			$ 35 comma 010$35,010

	Carson​ Electronics, Inc. Income Statement​ ($000)			BGT​ Electronics, Inc. Income Statement​ ($000)
Net sales​ (all credit)		$ 47 comma 950$47,950			$ 70 comma 030$70,030
Cost of goods sold		( 35 comma 980 )(35,980)			( 42 comma 050 )(42,050)
Gross profit		$ 11 comma 970$11,970			$ 27 comma 980$27,980
Operating expenses		( 8 comma 040 )(8,040)			( 11 comma 970 )(11,970)
Net operating income		$ 3 comma 930$3,930			$ 16 comma 010$16,010
Interest expense		( 1 comma 180 )(1,180)			( 500 )(500)
Earnings before taxes		$ 2 comma 750$2,750			$ 15 comma 510$15,510
Income taxes ​(40 %40%​)		( 1 comma 100 )(1,100)			( 6 comma 204 )(6,204)
Net income		$ 1 comma 650$1,650			$ 9 comma 306$9,306

PrintDone

Answer 1

a.Current Ratio = Current Assets / Current Liabilities

Carson​ Electronics, Inc.= 7970 / 7020 = 2.14

BGT​ Electronics, Inc. = 10030 / 8050 = 1.25

b. Times interest earned = Net operating income / Interest expense

Carson​ Electronics, Inc.= 3930 / 1180 = 3.33

BGT​ Electronics, Inc. = 16010 / 500 = 32.02

c.Inventory turnover = Cost of goods sold / Avg.Inventory

Carson​ Electronics, Inc.=35980 / 1530 = 23.52

BGT​ Electronics, Inc. = 42050 / 2500 = 16.82

d.Total asset turnover = Sales / Total Asset

Carson​ Electronics, Inc.= 47950 / 23950 = 2.002

BGT​ Electronics, Inc. = 70030 / 35010 = 2

e.Operating profit margin = Operating Profit / Sales

Carson​ Electronics, Inc.= 3930 / 47950 = 8.20%

BGT​ Electronics, Inc. = 16010 / 70030 = 22.86%

f. Operating return on assets = Operating Profit / Total Asset

Carson​ Electronics, Inc.= 3930 / 23950 = 16.41%

BGT​ Electronics, Inc. = 16010 / 35010 = 45.73%

g. Debt ratio = Total Liabilities / Total Assets

Carson​ Electronics, Inc.= (7020 + 7970 ) / 23950 = 0.626

BGT​ Electronics, Inc. = (8050 + 3990) / 35010 = 0.344

h. Average collection period = 365 / ( Sales / Receivables)

Carson​ Electronics, Inc.= 365 / (47950 / 4490 ) = 365 / 10.679 = 34.18 Days

BGT​ Electronics, Inc. = 365 / ( 70030 / 6020) = 365 / 11.632 = 31.38 Days

i. Fixed asset turnover = Sales / Fixed Assets

Carson​ Electronics, Inc.= 47950 / 15980 = 3.006

BGT​ Electronics, Inc. = 70030 / 24980 = 2.80

j. Return on equity = Net Income / Total Equity

Carson​ Electronics, Inc.= 1650 / 8960 = 18.42%

BGT​ Electronics, Inc. = 9306 / 22970 = 40.51%

BGT​ Electronics, Inc is performing better than Carson​ Electronics, Inc.