Question

Please use the following information to determine the financial metrics listed to complete the financial analysis of this company:

INCOME STATEMENT	2019	2018	2017	2016	2015
Revenue	$141,576	$129,025	$118,719	$116,199	$112,640
Cost of Revenue	$123,152	$111,882	$102,901	$101,065	$98,458
Gross Income	$18,424	$17,143	$15,818	$15,134	$14,182
Selling/Gen/Adm Exp	$13,944	$13,032	$12,146	$11,510	$10,962
Operating Income	$4,480	$4,111	$3,672	$3,624	$3,220
Interest Expense	$38.	$72	$53	$20	$23
Income Tax	$1,394	$1,325	$1,243	$1,195	$1,109
Net Income	$3,048	$2,714	$2,376	$2,409	$2,088
BALANCE SHEET
Cash	$6,055	$4,546	$3,379	$4,801	$5,738
Short Term Investments	$1,204	$1,233	$1,350	$1,618	$1,577
Receivables	$1,669	$1,432	$1,252	$1,224	$1,148
Inventory	$11,040	$9,834	$8,969	$8,908	$8,456
Other Current Assets	$321	$272	$268	$228	$0
Total Current Assets	$20,289	$17,317	$15,218	$16,779	$17,588
Total Assets	$40,830	$36,347	$33,163	$33,017	$33,024
Total Current Liabilities	$19,926	$17,495	$15,575	$16,539	$14,412
Total Liabilities	$28,031	$25,569	$21,084	$22,400	$20,721
Total Sharehldr Equity	$12,799	$10,778	$12,079	$10,617	$12,303

GROWTH: (Percentages to 2nd decimal point)

• Compound Annual Growth Rate 2015-2019: _____ %
• 2019 Growth Rate: _____ %

PROFITABILITY: (Percentages to 2nd decimal point)

• Gross Margin: _____ %
• Operating Margin: _____ %
• Net Margin: _____ %
• Return on Assets: _____ %
• Return on Equity _____ %

SUSTAINABILITY: (Ratios to 2nd decimal point)

• Current Ratio: _____
• Quick Ratio: _____
• Inventory Turnover Ratio: _____ times
• Average Days in Inventory: _____ days
• Debt-to-Assets Ratio: _____
• Debt-to-Equity: _____
• Times Interest Earned _____ times

Answer 1

(1) Compounded Annual Growth Rate in sales can be determined by following formula

= {(final year Revenue / starting year Revenue)^ (1/number of years given ) } -1

Given final year that is 2019 Revenue = 141,576 dollars

Starting year revenue that is 2015 = 112,640 dollars

Number of years given = 5

CAGR = {(141576/112640)^(1/5)} -

= {(1.256889)^(1/5)} - 1

=1.0467896 -1

= 0.468 or 4.68%

(2) Growth rate in 2019 = (Revenue in 2019 - Revenue in 2018) / Revenue in 2018

Given revenue in 2019 = 141,576 dollars

Revenue in 2018 = 129,025 dollars

Growth rate = (141576-129025)/129025

= 0.0973 or 9.73%

(3)Gross Margin = (Gross Profit / Revenue )*100

Given Gross Profit in 2019 = 18424 dollars

Revenue in 2019 = 141,576 dollars

Gross Margin = (18424/141576)*100

= 0.1301 or 13.01%

(4) Operating Margin = (Operating income / Revenue)*100

Given operating income = 4480 dollars

Operating Margin = (4480/141576)*100

=0.03164 or 3.16%

(5) Net Margin = (Net Income/ Revenue)*100

Given net income = 3048 dollars

Net margin = (3048/141576)*100

= 0.2153 or 2.15%

(6) Return on Assets = Net Income / Average Total Assets

Given 2018 assets = 36347 dollars

2019 assets = 40830 dollars

Average of total assets = (40830+36347)/2 = 38588.5 dollars

Return on Assets = 3048/38588.5 = 0.0790 or 7.90%

(7) Return on Equity = Net Income / Equity sharehders funds

Equity shareholders funds = 12799 dollars

Return on equity = 3048/12799 = 0.2381 or 23.81%

(8) Current Ratio = Current Assets / Current Liabilities

Given Current assets = 20289 dollars

Current Liabilities = 19926 dollars

Current ratio = 20289/19926 = 1.0182 times

(9) Quick Ratio = (Total current assets - inventory)/ Current Liabilities

Inventory =11040 dollars

Quick ratio = (20289-11040)/19926 = 0.4642 times

(10) Inventory Turnover ratio =( cost of goods sold/ average inventory)

COGS = 123,152 dollars

Inventory in 2019 = 11040 dollars

Inventory in 2018 = 9834 dollars

Average inventory = (11040+9834 )/2 = 10437 dollars

Inventory Turnover Ratio = 121352/10437 = 11.63 times

(11) Inventory days = 365 / Inventory Turnover Ratio

= 365/11.63

= 31 days

(12)Debt to Assets Ratio = Total Debt/ Total Assets

Total Debt = 28031 dollars

Total Assets = 40830

Debt to Assets ratio = 28031/40830 =0.6865

(13) Debt to Equity = Debt / Equity

= 28031/12799

= 2.19

(14) Interest Coverage Ratio = EBIT / Interest

EBIT = 4480 dollars

Interest = 38 dollars

Interest coverage ratio = 4480/38 = 117.89 times