) Using the financial statements for the Snider Corporation, calculate the basic ratios

found in the chapter.

SNIDER CORPORATION
Balance Sheet December 31, 2022
Assets
Current assets:
Cash...................................................... $ 50,000
Marketable securities ........................... 20,000
Accounts receivable (net) .................... 160,000
Inventory .............................................. 200,000
Total current assets ........................... $430,000
Investments ............................................. 60,000
Plant and equipment................................ 600,000
Less: Accumulated depreciation .......... (190,000)
Net plant and equipment ...................... 410,000
Total assets .............................................. $900,000

Liabilities and Stockholders’ Equity

Current liabilities
Account payable................................... $90,000
Notes payable ....................................... 70,000
Accrued taxes ....................................... 10,000
Total current liabilities ...................... 170,000
Long-term liabilities:
Bonds payable ...................................... 150,000
Total liabilities ..................................... $320,000
Stockholders’ equity
Preferred stock, $50 per value ............. 100,000
Common stock, $1 par value ............... 80,000
Capital paid in excess of par ................ 190,000
Retained earnings ................................. 210,000
Total stockholders’ equity................. 580,000
Total liabilities and stockholders’ equity $900,000
 SNIDER CORPORATION
Income statement
For the Year Ending December 31, 2022
Sales (on credit) $1,980,000
Less: Cost of goods sold 1,280,000
Gross profit 700,000
Less: Selling and administrative expenses 475,000*
Operating profit (EBIT) 225,000
Less: Interest expense 25,000
Earnings before taxes (EBT) 200,000
Less: Taxes 80,000
Earnings after taxes (EAT) $ 120,000
*Includes $35,000 in lease payments.

Where :
Share price in the market is $15
Sales in year 2021 $ 1,500,000
Total assets in year 2021 = 800,000

Industry average of equity multiplier is 1.8 times

Solution:
INDUSTRY Ratio

Average Comparisons

Profitability ratios

Profit margin = 5%

Return on assets (investment) = 12%

Return on equity = 18%

Assets utilization ratios

Receivable turnover = 13%

Average collection period = 25 day

Inventory turnover = 8 times

Fixed asset turnover = 6 times

Total asset turnover = 3.5 times

Liquidity ratio

Current ratio = 2.54 times

Quick ratio = 1times

Debt utilization ratios

Debt to total assets = 50%

Times interest earned = 8

Fixed charge coverage=

income before fixed charges and taxes
fixed charges
income before interest and taxes + Lease 5.5 times
fixed charges

fixed charges=lease+ interest

Sales Growth Ratios=
present value - previous value
previous value
Market performance

EPS= net income $ 1.2

NO. of shares

Price to book value = share price 3

book value Times

P/E ratio ( multiplier ) 8 times

 Smith Industry Ratio
Corp. ratios Comparisons
(Strength
and
weakness)
Profitability ratios:
Profit margin = Net income
Sales
5.25% 7.4% weakness
Return on assets (investment)(ROA)
= Net income
12.00% 18.5% weakness
Total assets
= Profit margin × Asset turnover
Return on equity (ROE) =
Net income/Stockholders' equity
34.4% 28.9% weakness
= ROA X Equity multiplier
ROA x assets / equity
Asset utilization ratios:
Receivables turnover =
Sales
14.29x 15.63x weakness
Receivables
Average collection period =
Accounts receivable×360
25 days 20 days weakness
Average credit sales
Inventory turnover = Sales
Inventory
13.3x 25x weakness
Or = COGS
Inventory
Fixed asset turnover = Sales
Fixed assets
4x 6x weakness
Total asset turnover = Sales
Total assets
2.29x 2.5x weakness
Liquidity ratios:
Curent ratio = Current assets
‫ــــــــــــــــــــــــــــــــــــــــــــــــــــــ‬
2.5x 1.5x weakness
Current liabilities
Quick ratio =
Current assets - inventory
1.5x 1.0x weakness
‫ــــــــــــــــــــــــــــــــــــــــــــــــــــــــ‬
Current liabilities
Debt Utilization Ratios
Debt to total assets=
Total debt 65.1% 36% weakness
TOTAL ASSETS
Times interest earned=
income before interest and taxes 6x 24.13x weakness
 ‫ـــــــــــــــــــــــــــــــــــــــــــــ‬Interest expenses
Fixed charge coverage=
income before interest and taxes +LEASE
133/28 weakness
fixed charges

where : fixed charges= lease + interest

4.75x 13.33x
Growth Ratios=
present value - previous value weakness
previous value
Sales growth rate
weakness
Assets growth rate
weakness