ABC Corporation ncome Statement 201Y 201X 201z 1,200,000 800,000 400,000 239,900

Question

ABC Corporation ncome Statement 201Y 201X 201z 1,200,000 800,000 400,000 239,900 160,100 35,000 125,100 36,900 88,200 30,000 2.94 1,500,000 1,040,000 460,000 274,000 186,000 45,000 141,000 49,200 91,800 30,000 3.06 1,875,000 1,310,000 565,000 304,700 260,300 85,000 175,300 55,600 119,700 38,000 Cost of Goods Sold Gross Profit Selling & Administerative Epxepnse Operating Profit (EBIT) Interest Expense Income Before Taxes Taxes Net Income Shares EPS Balance Sheet 201X 201Y 201Z Assets Cash Marketable Securities Accounts Receivable Inventory Total Current Assets 30,000 20,000 170,000 230,000 450,000 40,000 25,000 259,000 261,000 585,000 30,000 30,000 360,000 290,000 710,000 Net Plant and Equipment 650,000 765,000 1,390,000 1,100,000 1,350,000 2,100,000

Explanation / Answer

Hi,

The various ratios are

Based on the performance over the last three years, I would suggest not to invest in the business. The profitability of the company has been falling. Moreover the decline in the current ratios and cash ratios suggests that liability of the company has been rising steadily but the assets have not been rising in proportion. The debt ratio over the last 3 years has incresed to 0.59 from 0.50, which suggests that the company has been facing problem with mainting its liabilities.

Ratios 201X 201Y 201Z Net margin 7.35% 6.12% 6.38% Gross margin 33.33% 30.67% 30.13% EBIT Margin 13.34% 12.40% 13.88% asset turnover ratio 0.080 0.068 0.057 inventory turnover ratio 3.48 3.98 4.52 current ratio 2.04 1.72 1.31 cash ratio 0.14 0.12 0.06 debt ratio 0.50 0.52 0.59

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