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# Mini Case Essay

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Chapter 3 Mini Case
A. Managers use financial analysis to identify situations needing attention. Potential lenders use financial analysis to determine whether a company is creditworthy, and stockholders use financial analysis to help predict future earnings, dividends, and free cash flow.
B.
a. 2014 Current Ratio = Current Assets/Current Liabilities = \$2,680,112\$1,039,800 = 2.58
Current ratio measures a company’s ability to pay-off short-term liabilities such as debt and payables with short-term assets such as cash, inventories, and receivables. The higher the current ratio, the more capable the company is of paying its short-term liabilities

b. 2014 Quick Ratio = Current Assets-Inventories/Current Liabilities = \$2,680,112-1,716,480\$1,039,800 = 963,6321,039,800 = 0.93
Quick ratio measures the company’s ability to meet its short-term liabilities using its most liquid assets, inventories. This ratio is more conservative than the current ratio because it excludes inventory from the current assets. Inventories are excluded because companies have a hard time turning their inventory into cash

C.
c. 2014 Inventory Turnover = Sales/Inventories = \$7,035,6001,716,480 = 4.10
d. 2014 Days Sales Outstanding = Receivables/Annual Sales365 = \$878,00019,275.62 = 45.55
e. 2014 Fixed Assets Turnover = Sales/Net Fixed Assets = \$7,035,600\$836,840 = 8.41
f. 2014 Total Assets Turnover = Sales/Total Assets = \$7,035,600\$3,516,952 = 2.00
D.
g. 2014 Debt = Total Liabilities/Total Assets = \$3,516,952\$3,516,952 = 1.00
h. (\$1,039,800 + \$500,000)/\$3,516,952 = 43.8%.
i. 2014 Times-interest-earned = EBIT/Interest Expense = \$502,640\$80,000 = 6.28
j. 2014 EBITDA Coverage Ratio = (EBITDA+Lease)/PaymentsInterest+Principal Payments+Lease Payments = \$622,640+\$40,000\$80,000+\$0+\$40,000 = 5.52
E.
k. 2014 Profit Margin = Net Income available to Stockholders/Sales = \$253,584\$7,035,600 = 0.036
l....

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