Ratio Analysis

| June 24, 2015

Use the following current year financial statements for Precision Manufacturing to perform ratio analysis.

Precision Manufacturing Income Statement      

Revenue                                                       8,200,000

Cost of goods sold                                        5,100,000

Gross profit                                                  3,100,000

Operating expenses                                      2,500,000

Operating income (EBIT)                                  600,000

Interest expense                                              390,000

Earnings before taxes                                       210,000

Taxes (at 40%)                                                  84,000

Net income                                                      126,000

Precision Manufacturing Balance Sheet

Current assets                                                           

Cash                                                                125,000

Accounts receivable                                           900,000

Inventory                                                           575,000

Total current assets                                         1,600,000

Non-current assets

Fixed assets                                                    5,500,000

Accumulated depreciation                                (1,100,000)

Net fixed assets                                               4,400,000

Total assets                                                   $6,000,000

Current liabilities

Accounts payable                                             $945,000

Accrued liabilities                                               855,000

Total current liabilities                                       1,800,000

Non-current liabilities

Bonds payable                                                 2,600,000

Total liabilities                                                  4,400,000

Shareholders’ equity

Common stock                                                   140,000

Retained earnings                                             1,460,000

Total shareholders’ equity                                  1,600,000

Total liabilities and shareholders’ equity             $6,000,000

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