Financial Statement Analysis

| March 14, 2016

Financial Statement Analysis

The Financial Statements for Johnson Inc. for the year ended December 31, 2009, follow.

Johnson Inc Johnson Inc

Income Statement Balance Sheet

For the year ended December 31, 2009 For year ended December 31, 2009

Sales Revenue $160,000 Assets

Less: Cost of goods sold 106,000 Cash $ 500

Gross profits $ 54,000 Marketable Securities 1,000

Less: Operating Expenses Accounts Receivable 25,000

Selling Expenses $ 16,000 Inventories 45,500

General and Admin 10,000 Total Current Assets $ 72,000

Lease Expense 1,000 Land $ 26,000

Depreciation 10,000 Buildings & Equip 90,000

Total Operating Expense $ 37,000 Less : Accumulated Depreciation 38,000

Operating Profits $ 17,000 Net Fixed Assets $ 78,000

Less: Interest Expense 6,100 Total Assets $ 150,000

Net Profits before Taxes $10,900

Less: Taxes 4,360 Liabilities and Stockholders’ Equity

Net profit after taxes $ 6,540 Accounts Payable $ 22,000

Notes Payable 47,000

Total Current Liabilities $ 69,000

Long Term Debt $ 22,950

Common Stock $ 31,500

Retained Earnings $ 26,550

Total Liabilities and Equity $ 150,000

Use the preceding financial information to complete the following table. Assume the industry averages given in the table are applicable for both 2008 and 2009.

Ratio Industry Avg Actual 2008 Actual 2009

Current Ratio 1.80 1.84

Quick Ratio .70 .78

Inventory turnover 2.50 2.59

Average collection period 37.5 days 36.5 days

Debt Ratio 65% 67%

Gross Profit margin 38% 40%

Net profit margin 3.5% 3.6%

Return on total assets 4.0% 4.0%

A. Calculate the above ratios for 2009 and comment on how they relate to the actual ratios for 2008 and the industry average.

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