Question

Industry Average

Financial Ratios

　

2015

　

2016

　

2017

　

Liquidity

　

　

　

Accounts receivables turnover(times)

8.08

　

6.34

　

5.11

　

9.4

Average Collection Period (days)

45.17

　

57.59

　

71.46

　

38.8

Inventory turnover (times)

7.81

　

5.85

　

4.54

　

3.8

Average days in inventory (days)

46.73

　

62.37

　

80.35

　

96.1

Current ratio (times)

2.04

　

1.70

　

1.53

　

1.6

Quick or Acid-test ratio (times)

0.99

　

0.80

　

0.71

　

0.8

Solvency

　

　

　

Debt to Equity Ratio

94.7%

　

164.1%

　

229.8%

　

0.667

Times interest earned (times)

5.99

　

4.26

　

4.19

　

3.4

Profitability

　

　

　

Gross profit ratio (%)

29.7%

　

29.5%

　

29.8%

　

5.4%

Profit margin (%) [before tax]

2.2%

　

2.5%

　

3.5%

　

4.4%

Asset Turnover

2.26975906

　

1.977221

　

1.705226

　

1.8

Return on assets (%) [before tax]

7.5%

　

7.5%

　

9.0%

　

8.0%

Return on equity (%) [before tax]

14.7%

　

19.8%

　

29.6%

　

17.10%

Price to earnings ratio

$ 24.46

　

$18.62

　

$10.37

　

Cash Flow Statement

　

　

　

2016

　

　

2017

　

　

Cash, beginning of year

　

$ 1,512.00

　

$ 1,176.00

　

Operating Activities

Net Income

　

$ 1,627.00

　

$ 2,827.00

　

Plus Depreciation

　

$ 908.00

　

$ 1,292.00

　

Minus increase in accounts receivable

　

$ (4,034.00)

　

$ (5,648.00)

　

Minus increase in inventory

　

$ (3,302.00)

　

$ (4,732.00)

　

Minus increase in prepaid expenses

　

$ (1,360.00)

　

$ (1,700.00)

　

Plus increase in accounts payable

　

$ 2,388.00

　

$ 3,997.00

　

Plus increase in income taxes payable

　

$ 252.00

　

$ -

　

Plus increase in accruals & other cur.Liab.

　

$ 1,365.00

　

$ 1,656.00

　

Net Cash from operating activities

　

$ (2,156.00)

　

　

$ (2,308.00)

　

　

Investment Activities

Fixed asset acquisitions

　

$ (2,780.00)

　

$ (3,838.00)

　

Change in intangible assets

　

$ (21.00)

　

$ (17.00)

　

Change in all other noncurrent activities

　

$ (467.00)

　

$ (195.00)

　

Net Cash from investing activities

　

$ (3,268.00)

　

　

$ (4,050.00)

　

　

Financing Activities

Change in notes payable

　

$ 2,038.00

　

$ 3,080.00

　

Change current maturities--L.T.D.

　

$ 452.00

　

$ 786.00

　

Change in long-term debt

　

$ 3,160.00

　

$ 3,250.00

　

Change in Com Stock & paid-in cap

　

$ -

　

$ -

　

Dividends paid

　

$ (562.00)

　

$ (837.00)

　

Net Cash from financing Activities

　

$ 5,088.00

　

$ 6,279.00

　

Net Change in Cash

　

$ (336.00)

　

$ (79.00)

　

Cash, end of year

　

$ 1,176.00

　

$ 1,097.00

　

4. What is your assessment of the manner in which HTCM ismanaging its assets? Pay attention to both trends and industryaverages.

SOLVENCY (Financing of Assets)

5. What is your assessment of the manner in which HTCM isfinancing its assets? Pay attention to both trends and industryaverages. What is the relationship between the debt to equity ratioand times interest earned as these relate to HTCM? And is there anyother possible explanation (outside of the firm’s financialstatements) for the observed trend in times interest earned?

PROFITABILITY

6. What can you say about HTCM’s gross profit ratio and netprofit ratio? Explain any patterns observed.

7. How are HTCM’s net profit ratio, and asset turnover ratioaffecting the firm’s pre-tax return on assets (ROA) and return onequity (ROE)? What is your overall assessment of the firm’sprofitability, including its earnings per share (EPS)?

CASH FLOW

8. Referring to HTCM’s statement of cash flow for 2016 and 2017,assess HTCM’s cash flow situation noting both inflows andoutflows?

OVERALL EVALUATION

9. Based on your answers to the questions above, what is youroverall evaluation of HTCM’s financial condition? (Pull all youranalysis together in answering this question.)

10. What is the market’s assessment of HTCM’s financialcondition? Explain. Does the market’s assessment confirm or refuteyour analysis?

11. Based on your evaluation of HTCM and the market’s assessmentof the firm, would you accept employment with the company?Explain.