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1 Ratio Problem

The documents provide financial information for Magnetronics, Inc. for 1995 and 1999. Specifically: - Net sales and net income increased from 1995 to 1999, while gross profit, EBIT, and dividends also increased. However, tax rates and interest expenses decreased. - Cash, accounts receivable, inventories, and total assets all increased from 1995 to 1999 as the company grew. Long-term debt also increased while stockholders' equity nearly doubled. - Key profitability ratios like return on sales, gross margin, and operating margin decreased from 1995 to 1999 despite higher sales, indicating lower profitability. Leverage ratios increased slightly.

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Chandni Agrawal
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187 views3 pages

1 Ratio Problem

The documents provide financial information for Magnetronics, Inc. for 1995 and 1999. Specifically: - Net sales and net income increased from 1995 to 1999, while gross profit, EBIT, and dividends also increased. However, tax rates and interest expenses decreased. - Cash, accounts receivable, inventories, and total assets all increased from 1995 to 1999 as the company grew. Long-term debt also increased while stockholders' equity nearly doubled. - Key profitability ratios like return on sales, gross margin, and operating margin decreased from 1995 to 1999 despite higher sales, indicating lower profitability. Leverage ratios increased slightly.

Uploaded by

Chandni Agrawal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Exhibit 1 Magnetronics, Inc.

, Consolidated Income Statements


for Years Ending December 31, 1995 and 1999 (thousands of dollars)
1995 1999

Net sales $32,513 $48,769


Cost of goods sold 19,183 29,700
Gross profit $13,330 $19,069
Operating expenses 10,758 16,541
EBIT 2,572 2,528
Interest expenses 361 517
Income before taxes $2,211 $2,011
Federal income taxes 1,040 704
Net income $1,171 $1,307
Dividends 500 700

Exhibit 2 Magnetronics, Inc., Consolidated Balance Sheets at


December 31, 1995 and 1999 (thousands of dollars)
1995 1999

Cash $1,617 $2,020


Accounts receivable 5,227 7,380
Inventories 4,032 8,220
Current assets $10,876 $17,620
Net fixed assets 4,073 5,160
Total assets $14,949 $22,780

Notes payable, banks $864 $1,213


Accounts payable 1,615 2,820
Accrued expenses and taxes 2,028 3,498
Current liabilities $4,507 $7,531
Long-term debt 2,750 3,056
Stockholders equity 7,692 12,193
Total liabilities and stockholders' equity $14,949 $22,780
1995 1999
tax rate Av tax rate 47.0% 35.0%
EBIAT EBIT+I(1-T) $1,362 $1,643
EBIT(1-T) 1362.194482135 1643.011437096
Capital capital $11,306 $16,462
MV Equity
Depreciation
Total Liabilities TA-Equity
No of shares
Overall Profitability Ratios
ROE PAT/NW 15.2% 10.7%
ROA EBIAT/Assets 9.1% 7.2%
ROIC EBIAT/Capital 12.0% 10.0%
Profitability Ratios
Return on Sales (Net Margin) PAT/Sales 3.6% 2.7%
Gross Margin GrossProfit/Sales 41.0% 39.1%
Operating Margin EBIT/Sales 7.9% 5.2%
EBITDA Margin EBITDA/Sales
Activity Ratios
Asset Turnover Sales/TA 2.17 2.14
Fixed Asset turnover ratio Sales/FA 7.98 9.45
Current Asset turnover ratio Sales/CA 2.99 2.77
Inventory Turnover ratio COGS/Inventory 4.76 3.61
AR TO Ratio Sales/ AR 6.22 6.61
Average Sales per day Sales/365
Average Collection Period Reces/Av Sales
Inventory Holding Period
Leverage Ratios
Debt ratio TD/TA
Debt Ratio (Market)
ICR or TIE EBIT/I
Payables Period (days)
Liquidity Ratio
Current Ratio CA/CL
Quick Ratio (CA-Inv)/CL
Unidentified Balance Sheet
A B C D E
Balance Sheet Percentages
Cash 7.60% 2.70% 1.40% 7.20% 12.70%
Receivables 31.7 4.7 2.9 60.3 11.5
Inventories 5.3 2.0 23.0 8.7 48.1
Other current assets 1.2 3.0 1.8 7.3 0.0
Property and equipment (net) 30.2 66.6 49.9 4.3 25.0
Other assets 24.0 21.0 21.0 12.2 2.7
Total assets 100.00% 100.00% 100.00% 100.00% 100.00%

Notes payable 38.40% 4.20% 4.60% 50.80% 0.90%


Accounts payable 5.5 3.0 20.0 15.2 21.5
Other current liabilities 1.5 4.7 12.7 5.7 27.4
Long-term debt 17.4 30.0 37.5 22.7 8.1
Other liabilities 26.5 22.9 9.8 1.3 8.1
Owners equity 10.7 35.2 15.4 4.3 34.0
Total liabilities and equity 100.00% 100.00% 100.00% 100.00% 100.00%
Selected Ratios
Net profits/net sales .04 .14 .02 .01 .05
Net profits/total assets .03 .05 .06 .01 .03
Net profits/owners equity .29 .14 .41 .13 .10
Net sales/total assets .78 .36 3.2 2.1 .67
Collection period (days) 149 48 3 106 63
Inventory turnover 11 10 10 23 1.1
Total liabilities/total assets .89 .65 .85 .96 .66
Long-term debt/owners equity 1.6 .85 2.4 5.3 .24
Quick ratio .9 .9 .2 .9 .5

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