Comprehensive Ratio Analysis
P3.Tuxedo Corporations condensed comparative income statements and balance sheets follow. All figures are given in thousands of dollars except earnings per share.
1a: 2014 Current ratio: 1.5 times
1e: 2014 Inventory turnover: 3.9 times
2c: 2014 Return on assets: 5.0%
tuxedo CorporationComparative Income Statements
For the years ended December 31 2014 and 2013
3b: 2014 Return on equity: 8.2%
4a: 2014 Cash flow yield: 1.7 times
5b: 2014 Dividend yield: 1.3%
2014 2013
Net sales
$800400
$742600
Cost of goods sold
454100
396200
Gross margin
$346300
$346400
Operating expenses:
Selling expenses
$130100
$104600
Administrative expenses
140300
115500
Total operating expenses
$270400
$220100
Income from operations
$ 75900
$126300
Interest expense
25000
20000
Income before income taxes
$ 50900
$106300
Income taxes expense
14000
35000
Net income
$ 36900
$ 71300
Earnings per share
$ 2.46
$ 4.76
tuxedo Corporation Comparative Balance Sheets December 31 2014 and 2013
Cash
Assets
2014
$ 31100
2013
$ 27200
Accounts receivable (net)
72500
42700
Inventory
122600
107800
Property plant and equipment (net)
577700
507500
Total assets
$803900
$685200
Liabilities and Stockholders equity
Accounts payable
$104700
$ 72300
Notes payable (short-term)
50000
50000
Bonds payable
200000
110000
Common stock $10 par value
300000
300000
Retained earnings
149200
152900
Total liabilities and stockholders equity
$803900
$685200
Additional data for Tuxedo in 2014 and 2013 follow.
2014
2013
Net cash flows from operating activities
$64000
$99000
Net capital expenditures
$119000
$38000
Dividends paid
$31400
$35000
Number of common shares
30000
30000
Market price per share
$80
$120
Balances of selected accounts at the end of 2012 were accounts receivable (net) $52700; inventory $99400; accounts payable $64800; total assets $647800; and stockhold- ers equity $376600. All of the bonds payable were long-term liabilities.
ReQUIReD
Perform the following analyses. (Round to one decimal place.)
1. Prepare an operating asset management analysis by calculating for each year the
(a) current ratio (b) quick ratio (c) receivables turnover (d) days sales uncol- lected (e) inventory turnover (f) days inventory on hand (g) payables turnover
(h) days payable and (i) financing period.
2. Prepare a profitability and total asset management analysis by calculating for each year the (a) profit margin (b) asset turnover and (c) return on assets.
3. Prepare a financial risk analysis by calculating for each year the (a) debt to equity ratio (b) return on equity and (c) interest coverage ratio.
4. Prepare a liquidity analysis by calculating for each year the (a) cash flow yield (b) cash flows to sales (c) cash flows to assets and (d) free cash flow.
5. Prepare an analysis of market strength by calculating for each year the (a) price/ earnings (P/E) ratio and (b) dividend yield.
6.aCCounting ConneCtion After making the calculations indicate whether each ratio improved or deteriorated from 2013 to 2014 (useFfor favorable andUfor unfavorable and consider changes of 0.1 or less to be neutral)