Question

Problem 3-14
Comprehensive Ratio Analysis

The Jimenez Corporation's forecasted 2014 financial statements follow, along with some industry average ratios.

Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2014

Assets
Cash	$ 72,000
Accounts receivable	439,000
Inventories	894,000
Total current assets	$1,405,000
Fixed assets	431,000
Total assets	$1,836,000
Liabilities and Equity
Accounts payable	$ 332,000
Notes payable	100,000
Accruals	170,000
Total current liabilities	$ 602,000
Long-term debt	404,290
Common stock	575,000
Retained earnings	254,710
Total liabilities and equity	$1,836,000

Jimenez Corporation: Forecasted Income Statement for 2014

Sales	$4,290,000
Cost of goods sold	3,580,000
Selling, general, and administrative expenses	370,320
Depreciation and amortization	159,000
Earnings before taxes (EBT)	$ 180,680
Taxes (40%)	72,272
Net income	$ 108,408
Per Share Data
EPS	$ 4.71
Cash dividends per share	$ 0.95
P/E ratio of	5.0
Market price (average)	$ 23.57
Number of shares outstanding	23,000
Industry Financial Ratios (2013)*
The quick ratio of	1.0
The current ratio of	2.7
Inventory turnover**	7.0
Days sales outstanding***	32.0 days
Fixed assets turn over**	13.0
Total assets turnover**	2.6
Return on assets	9.1%
Return on equity	18.2%
The profit margin on aales of	3.5%
Debt-to-assets ratio	21.0%
Liabilities-to-assets ratio	50.0%
P/E ratio of	6.0
Price/Cash flow ratio of	3.5
Market/Book ratio of	3.5
*Industry average ratios have been constant for the past 4 years.
**Based on year-end balance sheet figures.
***Calculation is based on a 365-day year.

Calculate Jimenez's 2014 forecasted ratios, compare them with the industry average data, and comment briefly on Jimenez's projected strengths and weaknesses. Assume that there are no changes from the prior period to any of the operating balance sheet accounts. Round DSO to the nearest whole number. Round the other ratios to one decimal place.

Ratios	Firm	Industry	Comment
Quick ratio		1.0	-Select-Strong Weak Item 2
Current ratio		2.7	-Select-Strong Weak Item 4
Inventory turnover		7.0	-Select-Poor Rich Item 6
Days sales outstanding	days	32 days	-Select-Poor Rich Item 8
Fixed assets turnover		13.0	-Select-Poor Rich Item 10
Total assets turnover		2.6	-Select-Poor Rich Item 12
Return on assets	%	9.1%	-Select-Bad Good Item 14
Return on equity	%	18.2%	-Select-Bad Good Item 16
The profit margin on sales	%	3.5%	-Select-Bad Good Item 18
Debt ratio	%	21.0%	-Select-Low High item 20
Liabilities-to-assets	%	50.0%	-Select-Low High Item 22
EPS	$4.71	n.a.	--
Stock Price	$23.57	n.a.	--
P/E ratio		6.0	-Select-PoorRich Item 24
P/CF ratio		3.5	-Select-PoorRich Item 26
M/B ratio		n.a.	--

So, the firm appears to be -Select-badly good item 28 managed