Fin 571 week 2 individual assignment ratio analysis problems

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1.  Analysis of cost of goods sold problem.

                                                                                      1992       1993    1994

      Gross Profit Margin                                                60%        55%     51% 

What is happening to cost of goods sold?  As was done in the week 2 online lecture on ratio analysis, please assume sales of 1 dollar each year as you do your analysis.  This problem follows the process shown in the Week 2 Ratio Analysis online lecture section titled: “Another Income Statement Analytical Approach: Percent of Sales” (5 points).


2.  Overhead (or Sales, General and Administrative Expense) problem. 

                                                                                 1992       1993    1994

   Gross Profit Margin                                               40%        39%    41%

   Operating Margin (NOI/Sales)                              15%        10%      5% 


What is happening to S,G and A (or overhead expenses)?  Please set up an illustration assuming sales of 1.00 dollar each year just as you did in problem number one. (5 points)


3. Balance Sheet Problem 

                                                                               1992       1993    1994

   Annual Sales Growth (over prior yr)                   + 1%        0%     +1%

   Current Ratio                                                          3.5X        2X      1.2X

   Average Collection Period                                    25 days   30 days  55 days 


What is happening to liquidity?  Why? What are some follow-up questions you would ask?  (5 points) 


4.  Using the data provided below, which is the better managed company?  Why?  Please support your answers by calculating appropriate ratios. (5 points) 


                              Company A                      Company B 

Sales              10 million dollars                    20 million dollars

Net Income       1 million dollars                      2 million dollars

Total Assets     10 million dollars                   15 million dollars 


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