You are on page 1of 8

AVERY PRODUCTS, INC.

BALANCE SHEET

1988 1994
Cash $41,000 $61,000
Accounts receivable $163,000 $245,000
Inventory $204,000 $306,000
Total current assets $408,000 $612,000

Land and building $61,000 $49,000


Machinery $81,600 $151,000
Other fixed assets $49,000 $28,600
Total assets $599,600 $840,600

Notes payable, bank ‑ ‑


Accounts and notes payable $90,000 $98,000
Accruals $40,800 $49,000
Total current liabilities $130,800 $147,000

Mortgage $61,000 $45,000


Common stock $365,000 $365,000
Retained earnings $42,800 $283,600
Total liability and equity $599,600 $840,600
1995 1996
$28,600 $20,400 $20,400
$277,400 $388,000 $887,596
$510,000 $826,200 $328,600
$816,000 $1,236,596 $1,236,596

$130,600 $122,400
$118,300 $102,000
$8,200 $6,100
$1,073,100 $1,465,100

$102,000 $286,000
$155,000 $306,000
$57,000 $77,500
$314,000 $669,500

$40,800 $36,700
$365,000 $365,000
$353,300 $393,900
$1,073,100 $1,465,100
inventory turnover 7X $71,400

cash $20,400
net income $53,400
depreciation $122,400
daily acc receivable $7,800
AVERY PRODUCTS, INC.
INCOME STATEMENT

1994 1995
Net sales $2,652,000 $2,754,000
Cost of goods sold $2,121,600 $2,203,200
Gross operating profit $530,400 $550,800

General administration and selling $204,000 $224,400


Depreciation $81,600 $102,000
Miscellaneous $40,800 $85,700
Net income before taxes $204,000 $138,700
Taxes -35% $71,400 $48,545
Net income $132,600 $90,155
1996
$2,856,000 sales $2,900,000 = 7x
$2,284,800 inventory
$571,200
inventory= $414,286
$244,800
$122,400 actual -average= $826,200 $414,286
$122,400
$81,600
$28,560
$53,040
$414,286

= $411,914
1988 1994 1995 1996
Quick Ratio 1.5596 2.0816 0.9745 0.6130
Current ratio 3.1193 4.1633 2.5987 1.8470
Inventory turnover 5.4000 3.4198
Average collection period 33.7198 36.7651 49.5868
Fixed‑asset turnover 11.34 11.71
Total asset turnover 2.8782 2.2504
Return on total assets 9.42% 4.18%
Return on net worth 3.10% 1.71%
Debt ratio 27.90% 21.19% 41.36% 84.15%
Profit margin on sales 5.00% 3.27% 1.86%

Quick Ratio The quick ratio is decreasing from 1994 to 1996, we can observe that
both, quick assets and current liabilities are increasing, but the
current liabilities are increasing faster than the assets. This means
that for every asset increase in Avery Products Inc. is having, the
more is the liability.

Current Ratio The Current Ratio is decreasing from 1994 to 1996, the current assets
are increasing through these periods, but the current liabilities are
also increasing but more faster than the assets and we can observe
that since 1995 is below the Industry ratio.

Inventory Turnover
Industry 2
1
2.7
7x $326,400 $163,200
32 days $254,247 $127,124
13x $290,324
2.6x
11.70%
23.40%
50.00%
4.50%

we can observe that


easing, but the
ssets. This means
nc. is having, the

96, the current assets


rrent liabilities are
nd we can observe