Professor/Dr: Sulaiman Alsakran

Name: saud al rajhi

Course: FIN 470

Jackson Product’s Company Evaluation

a/ Liquidity Ratio:

CA 1,600,000
Current Ratio= = = 1.88 Times
CL 850,000

CA-(Inventory) 1,600,000-(1,040,000)
Quick Ratio= = = .65 Times
CL 850,000

Net Working Capital= CA - CL = (1,600,000 - 850,000) = 750,000

There are lower ratio than the industry average, but it has a good current ratio comparing to
the industry average, cause the company can pay their liabilities 1.88 for each time. In
another hand, the Quick Ratio is moderate which is not bad by .65 times. However, most of
investors focus more about the current ratio. Overall liquidity ratio Net working capital is
positive, that indicates the company can cover their liabilities without any suffer.

B/ Efficiency Ratio:
Sales 3,000,000
A/R Turnover= = = 9.37 times
A/R 320,000

365 365
Days in A/R= = = 38.93 days
A/R Turnover 9.37

For the days Account receivables is not bad, it seems stabilize and higher than the industry
average which the company collect the cash after 38.93 days.

COGS 1,800,000
Inventory Turnover= = = 1.72 times
Inventory 1,040,000

The company Inventory turnover 1.72 times is lower than industry average which is poor, and
might their products will not be selling and stock in the inventory.

Sales 3,000,000
Total Asset Turnover = = = 1.25 times
Assets 2,400,000

Jackson Company asset turnover 1.25 times is lower than average industry, and that means
using their sales to generate the assets are low.

C/ Financial Risk:

EBIT 340,000
Time Interested Earned = = = 2.88 times
Interest 117,800

Overall Jackson company is reaching above 2.5 that means acceptable risk, but it is still risky
than average industry, which make the investors aware.

Assets 2,400,000
Total Assets / Stockholders Equity= = = 3.2 times
Equity 750,000
That indicates Jackson Company debt ratio which 3.2 times is higher than industry average
which is risker, cause they have more debt to finance their business and that is moderate.

D/ Profitability Ratio:

Net Income 133,320

Net Profit Margin= = = 4.4 %
Sales 3,000,000

Net Profit Margin for the company is higher than average industry, and that is good to
increase their profit and strong segment.

Net Income 133,320

Return on Investment = = = 5.5%
Total Assets 2,400,000

Return on Investment is 5.5% and closer to the industry average, still in good shape. So
Jackson Company can still attract the investors.

Net Income 133,320

Return on Stockholders Equity = = = 17.76%
Equity 750,000

Jackson Company Return on Equity is higher than industry average and that determines high
generate of profit in overall is good.

E/ Evaluation the company:

There are a moderate liquidity ratio which they can pay back their liabilities. In efficiency
ratio side, they have high inventory and could affect their sales in the future and the cost is
same, that can give unclear pictures to the investors in income statements. Financial Risk
way, the company is risker than industry average and has more interest to pay. However, it is
normal because based on their high profit they will be more risk and they use their debt to
rise their income. Finally, Profitability Ratio in overall the company performance is good and
attractive to investors based on the ROI and ROE.
F/ Dupont Analysis: There are three factors for Dupont Analysis

ROE= Profit Margin  Asset Turnover  Equity Multiplier

ROE= 4.4%  1.25%  3.2% = 17.76%

G/ P/E Ratio:

Price
P/E= =
E.P.S

Net Income

Numbers of shares