Scribd
Upload
131 views2 pages

Case CH 5

Zach Industries' financial statements for 2012 show total current assets of $72,000 including cash, marketable securities, accounts receivable, and inventories. Total assets were $150,000 which includes $78,000 in net fixed assets such as land, buildings, and equipment. Total liabilities including current, long-term, and stockholders' equity were $150,000. Zach Industries' 2012 financial ratios show an improvement in liquidity and debt levels compared to 2011, while activity, profitability, and market ratios remained steady or slightly lower. Overall, Zach Industries' financial condition in 2012 appears stable compared to the prior year.

Uploaded by

Faldi Haris
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
131 views2 pages

Case CH 5

Zach Industries' financial statements for 2012 show total current assets of $72,000 including cash, marketable securities, accounts receivable, and inventories. Total assets were $150,000 which includes $78,000 in net fixed assets such as land, buildings, and equipment. Total liabilities including current, long-term, and stockholders' equity were $150,000. Zach Industries' 2012 financial ratios show an improvement in liquidity and debt levels compared to 2011, while activity, profitability, and market ratios remained steady or slightly lower. Overall, Zach Industries' financial condition in 2012 appears stable compared to the prior year.

Uploaded by

Faldi Haris
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Case of Chapter 5

1. The financial statements of Zach Industries for the year ended December 31, 2012, follow

Cash $ 500
Marketable securities 1,000
Accounts receivable 25,000
Inventories 45,500
Total current assets 72,000
Land 26,000
Buildings and equipment 90,000
Less: Accumulated depreciation 38,000
Net fixed assets (include land) 78,000
Total assets $ 150,000

Liabilities and Stockholders’ Equity


Accounts payable $ 22,000
Notes payable 47,000
Total current liabilities 69,000
Long-term debt 22,950
Common stock a
31,500
Retained earnings 26,550
Total liabilities and stockholders’ equity $ 150,000
a
The firm’s 3,000 outstanding shares of common stock closed 2012 at a price
of $25 per share.

a. Use the preceding financial statements to complete the following table. Assume the industry
averages given in the table are applicable for both 2011 and 2012.
Industry
Ratio average Actual 2011 Actual 2012
Current ratio 1.8 1.84 _________
Quick ratio 0.70 0.78 _________
Inventory turnover a
2.50 2.59 _________
Average collection period a 37.5 36.5 _________
Debt ratio 65% 67% _________
Times interest earned ratio 3.8 4 _________
Gross profit margin 38% 40% _________
Net profit margin 3.50% 3.60% _________
Return on total assets 4.00% 4.00% _________
Return on common equity 9.50% 8.00% _________
Market/book ratio 1.1 1.2 _________
a
Based on a 365-day year and on end-of-year figures.

b. Analyze Zach Industries’ financial condition as it is related to (1) liquidity,(2) activity, (3) debt, (4)
profitability, and (5) market. Summarize the company’soverall financial condition.

You might also like