Abington-Hill Toys Essay

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ABINGTON-HILL TOYS, INC. Part 1: Financial-Ratio Analysis I. INTRODUCTION With the death of Lewis Hill, Abington-Hill Toy Company is in search for a new president. A key concern of the owners was the lack of financial planning and general crisis-to-crisis pattern that had characterized the firm’s operation in recent years. The firm’s owners felt that the company’s prospects were good if a capable manager could take over the leadership position. After an extensive outside the firm search for a new leader, Vernon Albright assumed the position of president. Vernon Albright’s first action as the new president was hiring David Hartly as company comptroller. Lewis Hill’s final years with the company were not positive, as the company has been deteriorating. With the specific market Abington-Hill Toy Company is in and the current state is has been in the past few years, the firm is facing pressing problems. II. Methodology A. Current Ratio B. Quick Ratio C. Average Collection Period D. Inventory Turnover E. Fixed Asset Turnover F. Total Asset Turnover G. Debt Ratio H. Times Interest Earned I. Gross Margin J. Net Profit Margin K. Return on Total Assets L. Return on Net Worth III. Solutions A. Current Ratio i. 1990 = 300,000 / 110,000 = 2.727 ii. 1991 = 280,000 / 290,000 = .966 B. Quick Ratio i. 1990 = (300,000 – 150,000) / 110,000 = 1.364 ii. 1991 = (280,000 – 150,000) / 290,000 = .448 C. Average Collection Period i. 1991 = 120,000 / (1,200,000 * .6 / 360) = 60,000 days D. Inventory Turnover i. 1991 = 900,000 / 150,000 = 6.00 E. Fixed Asset Turnover i. 1991 = 1,200,000 / 920,000 = 1.304 F. Total Asset Turnover i. 1991 = 1,2000,000 / 1,200,000 = 1.00 G. Debt Ratio i. 1990 = (110,000 + 200,000) / 1,000,000 = .310 or 31% ii. 1991

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