Please complete the ratio analysis homework problems found in the file link below.
The week two online lectures contain information on how to these problems.To do problems one and two in the homework please study the section on Percent of Sales analysis.
Please use an excel spreadsheet when you complete this assignment. If you do not know how to use excel, you can use word.doc PLEASE DO NOT SUBMIT as a PDF format assignment.
Ratio Analysis
(Individual Assignment)
You may use excel or word.doc format for this assignment.
1. Analysis of cost of goods sold problem.
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Gross Profit Margin 60% 55% 51%
What is happening to cost of goods sold? As was done in the week 2 online lecture on ratio analysis, please assume sales of 1 dollar each year as you do your analysis. You need to show the cost of goods as pennies per dollar of sales. Set up the problem using the income statement format in the online lecture example. This problem follows the process and format shown in the online lecture section titled: “Another Income Statement Analytical Approach: Percent of Sales”
(30 points)
2. Overhead (or Sales, General and Administrative Expense) problem.
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Gross Profit Margin 40% 39% 41%
Operating Margin (NOI/Sales) 15% 10% 5%
What is happening to S,G and A (or overhead expenses)? Please set up an illustration assuming sales of 1.00 dollar each year just as you did in problem number one.You need to show cost of goods and S,G and A (or overhead expenses) as pennies per dollar of sales. Again, as in problem 1, set up the income statement format as was shown in the online lecture example.
(30 points)
3. Balance Sheet Problem
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Annual Sales Growth (over prior yr) + 1% 0% +1%
Current Ratio 3.5X 2X 1.2X
Average Collection Period 25 days 30 days 55 days
What is happening to liquidity? What are some follow-up questions your would ask? (30 points)
4. Using the data provided below, which is the better managed company? Why? Please support your answers by calculating appropriate ratios. You can find the ratios and formulas for these ratios in the week two online lecture on ratio analysis. (30 points)
Company A Company B
Sales 10 million dollars 20 million dollars
Net Income 1 million dollars 2 million dollars
Total Assets 10 million dollars 15 million dollars