Case study: Financial ratios

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… School of Business Administration Fall 2009 Case study FIN 5305 Case study: Financial ratios You’ve been recently hired as a financial analyst by SSS Industries, a manufacturer of electronic calculators. Your first task was to conduct a financial analysis of the firm covering the last two years. To begin, you gathered the following financial statements and other data. BALANCE SHEETS 2008 2007 Assets: Cash $52,000 $57,600 Accounts receivable 402,000 351,200 Inventories 836,000 715,200 Total current assets $1,290,000 $1,124,000 Gross fixed assets $ 527,000 $491,000 Less accumulated depreciation 166,200 146,200 Net fixed assets $360,800 $344,800 Total assets $1 650 800 $1468800 Liabilities and Equity: Accounts payable 175,200 145,600 Notes payable 225,000 200,000 Accruals 140,000 136,000 Total current liabilities $540,200 $481,600 Long-term debt $424,612 $323,432 Common stock (100,000 shares) $460,000 $460,000 Retained earnings 225,988 203,768 Total equity $685,988 $663,768 Total liabilities and equity $1650800 $1,468,800 INCOME STATEMENTS Sales $3,850,000 $3,432,000 Cost of goods sold $3,250,000 $2,864,000 Other expenses 430,300 340,000 Depreciation 20,000 18,900 Total operating costs $3,700,300 $3,222,900 EBIT $149,700 $ 209,100 Interest expense 76,000 62,500 EBT $73,700 $ 146,600 Taxes (40%) 29,480 58,640 Net income $44,220 $87,960 EPS $0,442 $0,880 Other Data.. December 31 stock price $6.00 $8.50 Number of shares 100,000 100,000 Dividends per share $0.22 $0.22 Lease payments $40,000 $40,000 STATEMENT OF

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