Ratio analysis: Refer to the information above for Nederland Consumer Products C
ID: 2821010 • Letter: R
Question
Ratio analysis: Refer to the information above for Nederland Consumer Products Company. Compute the firm’s ratios for the following categories and briefly evaluate the company’s performance from these numbers. a. Efficiency ratios b. Asset turnover ratios c. Leverage ratios d. Coverage ratios Nederland Consumer Products Company Income Statement for the Fiscal Year Ended September 30, 2014 Net sales $51,407 Cost of products sold $25,076 Gross margin $26,331 Marketing, research, administrative exp. $15,746 Depreciation $758 Operating income (loss) $9,827 Interest expense $629 Other nonoperating income (expense), net $152 Earnings (loss) before income taxes $9,350 Income taxes $2,869 Net earnings (loss) $6,481 Nederland Consumer Product Company Balance Sheet as of September 30, 2014 Assets: Liabilities and Equity: Cash and cash equivalents $5,469 Accounts payable $3,617 Investment securities 423 Accrued and other liabilities 7,689 Accounts receivable 4,062 Taxes payable 2,554 Inventory 4,400 Debt due within one year 8,287 Deferred income taxes 958 Total current liabilities $22,147 Prepaid expenses and other receivables 1,803 Long-term debt 12,554 Total current assets $17,115 Deferred income taxes 2,261 Property, plant, and equipment, at cost 25,304 Other noncurrent liabilities 2,808 Less: Accumulated depreciation 11,196 Total liabilities $39,770 Net property, plant, and equipment $14,108 Convertible class A preferred stock 1,526 Net goodwill and other intangible assets 23,900 Common stock 2,141 Other noncurrent assets 1,925 Retained earnings 13,611 Total shareholders' equity (deficit) $17,278 Total assets $57,048 Total liabilites and shareholders' equity $57,048 Ratio analysis: Refer to the information above for Nederland Consumer Products Company. Compute the firm’s ratios for the following categories and briefly evaluate the company’s performance from these numbers. a. Efficiency ratios b. Asset turnover ratios c. Leverage ratios d. Coverage ratios Nederland Consumer Products Company Income Statement for the Fiscal Year Ended September 30, 2014 Net sales $51,407 Cost of products sold $25,076 Gross margin $26,331 Marketing, research, administrative exp. $15,746 Depreciation $758 Operating income (loss) $9,827 Interest expense $629 Other nonoperating income (expense), net $152 Earnings (loss) before income taxes $9,350 Income taxes $2,869 Net earnings (loss) $6,481 Nederland Consumer Product Company Balance Sheet as of September 30, 2014 Assets: Liabilities and Equity: Cash and cash equivalents $5,469 Accounts payable $3,617 Investment securities 423 Accrued and other liabilities 7,689 Accounts receivable 4,062 Taxes payable 2,554 Inventory 4,400 Debt due within one year 8,287 Deferred income taxes 958 Total current liabilities $22,147 Prepaid expenses and other receivables 1,803 Long-term debt 12,554 Total current assets $17,115 Deferred income taxes 2,261 Property, plant, and equipment, at cost 25,304 Other noncurrent liabilities 2,808 Less: Accumulated depreciation 11,196 Total liabilities $39,770 Net property, plant, and equipment $14,108 Convertible class A preferred stock 1,526 Net goodwill and other intangible assets 23,900 Common stock 2,141 Other noncurrent assets 1,925 Retained earnings 13,611 Total shareholders' equity (deficit) $17,278 Total assets $57,048 Total liabilites and shareholders' equity $57,048Explanation / Answer
a. Efficiency ratios:
Inventory tunrnover ratio = cost of goods sold / inventory
= $25,076 / $4,400
= 5.70
days sales inventory = 365 / Inventory tunrnover ratio
= 365 / 5.70
= 64.04 days
Accounts receivable turnover = net sales / Accounts receivable
=$51,407 / 4062
= 12.66
days sale outstanding = 365 / Accounts receivable turnover
= 365 / 12.66
=28.83 days
b. Asset turnover ratios
Total assets turnover = net sales / total assets
=$51,407 / $57,048
= 0.9
Fixed Asset turnover ratios = net sales / Net property, plant, and equipment
= $51,407 / 14108
= 3.64
c. Leverage ratios :
Debt-equity ratio =Total liabilities / Total shareholders' equity
=$39,770 / $17,278
=2.30
Total debt ratio =Total liabilities / Total assets
=$39,770 / $57,048
=0.70
Equity multiplier ratio =Total assets / Total equity
= $57048 / $17278
= 3.30
d. Coverage ratios
Interest coverage ratio = operating income / interest expense
= $9,827 / $629
=15.62
Cash coverage ratio = [operating income + depreciation] / interest expense
= 10585 / $629
= 16.83
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