Rey Joyce B.

Abuel July 20, 2018

AEC 13 – ACB

4-25 D’LEON INC., PART II Financial Statement and Taxes

A. Ratios are useful in such a way that it helps managers or internal users in improving and
assessing the firm’s performance. It is also used to analyze financial statements in order to
identify weaknesses that need to be strengthened to maximize stock price. The firm’s ratios
are compared with averages for its industry and with the leading firms in the industry, and
these comparisons are used to help formulate policies that will lead to improved future
performance. The firm’s own ratios can be analyzed over time to see if its financial situation
is getting better or worse. The five major categories of ratios are: liquidity, asset
management, debt management, profitability, and market value.

B. Current ratio = 2.34x

Quick ratio = 0.84x

C.
B.
2013 2012 2011 Industry
Current Ratio:
Total Current Assets $ 2,680,112 $ 1,962,802 $ 1,124,000
Divided by Total Current Liabilities $ 1,144,800 $ 1,650,568 $ 481,600
2.34 1.20 2.33 2.7

Acid Test (Quick) Ratio:

Total Quick Assets $ 963,632 $ 639,442 $ 408,800
Divided by Total Current Liabilities $ 1,144,800 $ 1,650,568 $ 481,600
0.84 0.40 0.85 1.0

C.
2013 2012 2011 Industry
Inventory Turnover:
Sales $ 7,035,600 $ 6,034,000 $ 3,432,000
Divided by Inventory $ 1,716,480 $ 1,287,360 $ 715,200
4.10 4.69 4.80 6.1

2013 2012 2011 Industry

Daily Sales Outstanding:
Receivables $ 878,000 $ 632,160 $ 351,200
Divided by Daily Sales
(Annual Sales/365 days) $ 19,276 $ 16,532 $ 9,403
45.55 38.24 37.35 32.0

2013 2012 2011 Industry

Fixed Assets Turnover:
Sales $ 7,035,600 $ 6,034,000 $ 3,432,000
Divided by Net Fixed Assets $ 817,040 $ 939,790 $ 344,800
8.61 6.42 9.95 7.00

2013 2012 2011 Industry

Total Assets Turnover:
Sales $ 7,035,600 $ 6,034,000 $ 3,432,000
Divided by Total Assets $ 3,497,152 $ 2,866,592 $ 1,468,800
2.01 2.10 2.34 2.6
D.
2013 2012 2011 Industry
Debt Ratio:
Total Liabilities $ 1,544,800 $ 2,374,000 $ 805,032
Divided by Total Assets $ 3,497,152 $ 2,866,592 $ 1,468,800
44.2% 82.8% 54.8% 50.0%

2013 2012 2011 Industry

Times Interest Earned Ratio:
EBIT $ 492,648 $ (130,948) $ 190,428
Divided by Interest Expense $ 70,008 $ 136,012 $ 43,828
7.04 -0.96 4.34 6.20

E.
2013 2012 2011 Industry
Operating Margin:
EBIT $ 492,648 $ (130,948) $ 190,428
Divided by Sales $ 7,035,600 $ 6,034,000 $ 3,432,000
7.00% -2.17% 5.55% 2.7

2013 2012 2011 Industry

Profit Margin:
Net Income $ 253,584 $ (160,176) $ 87,960
Divided by Sales $ 7,035,600 $ 6,034,000 $ 3,432,000
3.60% -2.65% 2.56% 3.50%

2013 2012 2011 Industry

Basic Earning Power:
EBIT $ 492,648 $ (130,948) $ 190,428
Divided by Total Assets $ 3,497,152 $ 2,866,592 $ 1,468,800
14.09% -4.57% 12.96% 19.10%

2013 2012 2011 Industry

Return on Assets (ROA):
Net Income $ 253,584 $ (160,176) $ 87,960
Divided by Total Assets $ 3,497,152 $ 2,866,592 $ 1,468,800
7.25% -5.59% 5.99% 9.10%
 2013 2012 2011 Industry
Return on Equity (ROE):
Net Income $ 253,584 $ (160,176) $ 87,960
Divided by Common Equity $ 1,952,352 $ 492,592 $ 663,768
12.99% -32.52% 13.25% 18.20%

F.
2013 2012 2011 Industry
Price/Earnings Ratio:
Market Price per Share $ 12.17 $ 2.25 $ 8.50
Divided by EPS $ 1.01 $ (1.60) $ 0.88
12.00 -1.40 9.66 14.20

2013 2012 2011 Industry

Market/Book Ratio:
Market Price per Share $ 12.17 $ 2.25 $ 8.50
Divided by Book Value $ 7.81 $ 4.93 $ 6.64
1.56 0.46 1.28 2.40

G.

ROE = Profit Margin × Total Asset Turnover × Equity Multiplier

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑆𝑎𝑙𝑒𝑠
× ×
𝑆𝑎𝑙𝑒𝑠 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

2013 2012 2011 Industry

Return on Assets (ROA):
Net Income $ 253,584 $ (160,176) $ 87,960
Divided by Total Assets $ 3,497,152 $ 2,866,592 $ 1,468,800
7.25% -5.59% 5.99% 9.10%