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1. Calculate the firm`s 2007 financial ratios.

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  • Post Date 2018-11-06T13:09:44+00:00
  • Post Category Essays

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1. Calculate the firm`s 2007 financial ratios.

Ratio Analysis

INSTRUCTIONS:

Critical Thinking Assignment Module 2



Ratio Analysis

The Vanguard Group, Inc. has compiled the following financial statements and comparative financial ratios for the year-end review.



___________________________________

Balance Sheet

Vangaurd Group, Inc.

December 31, 2007

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Assets

Current Assets 

Cash $118,750

Accounts Recievable 296,250

Inventory 303,750

Total Current Assets $718,750

Gross Fixed Assets $625,000

Less: Accumulated Depreciation 93,750

Net Fixed Assets 531,250

Total Assets $1,250,000



Liabilites and Stockholders` Equity

Current Liabilities 

Accounts Payable $111,250

Notes Payable 211,250

Accruals 108,750

Total Current Liabilites $431,250

Long-Term Debt 235,000

Total Liabilities $666,250

Stockholders` Equity

Common Stock 318,750

Retained Earnings 265,000

Total Stockholders` Equity $583,750

Total Liabilities and Stockholders` Equity $1,250,000

_________________________________________________________________________

Income Statement 

Vanguard Group, Inc. 

for the Year Ended December 31, 2007

_________________________________________________________________________

Sales Revenue $1,680,000

Cost of Sales 1,362,480

Gross Profits $ 317,520

Less: Operating Expenses 

Selling Expense $ 125,600

General and Administrative Expense 81,600

Depreciation Expense 24,000

Total Operating Expense $231,200

Operating Profits $ 86,320

Less: Interest Expense 15,600

Net Profits before taxes $ 70,720

Less: Taxes (40%) 28,288

Net Profits after taxes $ 42,432

__________________________________________________________________________



Historical and Industry Average Ratios

Vanguard Group, Inc.



Ratio 2005 2006 2007 Industry Average

______________________________________________________________________2007_______

Current Ratio 1.6 1.7 ____ 1.6

Quick Ratio 0.9 1.0 ____ 0.9

Inventory turnover 6.0 5.0 ____ 8.4

Average Collection Period 40 days 50 days _________ 40 days

Total Asset Turnover 1.5 1.5 ____ 1.75

Debt Ratio 60% 56% ______ 50%

Times Interest Earned 2.5 3.5 _____ 4.0

Gross Profit Margin 20% 19.7% _____ 20%

Operating Profit Margin 4.7% 4.8% _____ 6%

Net Profit Margin 2.0% 2.3% ______ 3%

Return on Investment 3.0% 3.5% ______ 5.25%

Return on Equity 7.5% 7.95% ______ 10.5%

______________________________________________________________________________



1. Calculate the firm`s 2007 financial ratios.

2. Prepare an executive summary on the firm’s overall financial condition and performance. Your

summary must be at least one page, but no more than 3 pages. Comment on the meaning of each

ratio, discussing its trend and its comparison to the industry average.

CONTENT:

Ratio Analysis Name: Subject: Date of Submission Ratio Analysis Table SEQ Table * ARABIC 1: Financial ratios for the Vanguard Group, Inc. for the period ending December 31, 2007 The gross profit margin for the organization is 19 percent while the gross profit margin for the industry is twenty percent. This means that t

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