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Ratio Analysis. The Williams Corporationâs forecasted 2010 financial statements follow, along with some industry average ratios.
Forecasted Balance Sheet as of December 31, 2010
Cash
$ 72,000
Accounts receivables
$ 439,000
Accounts and notes payable
$ 432,000
Inventories
$ 894,000
Accruals
$ 170,000
Total current assets
$1,405,000
Total current liabilities
$ 602,000
Land and building
$ 238,000
Long-term debt
$ 404,290
Machinery
$ 132,000
Common stock
$ 575,000
Other fixed assets
$ 61,000
Retained earnings
$ 254,710
Total assets
$1,836,000
Total liabilities and equity
$1,836,000
Forecasted Income Statement for 2010
Sales
$4,290,000
Cost of goods sold
$3,580,000
Per-Share Data
Gross operating profit
$ 710,000
EPS
$ 4.71
General admin & selling expenses
$ 236,320
DPS
$ 0.95
Depreciation
$ 159,000
P/E Ratio
5.00
Misc.
$ 134,000
Market price
$ 23.57
Earnings before Taxes
$ 180,680
Number of shares outstanding
23000
Taxes
$ 72,272
Net Income
$ 108,408
Industry Financial Ratios
Williamâs Financial Ratios
Ratio/Comment
Quick Ratio
1x
Quick Ratio
Current Ratio
2.7x
Current Ratio
Inventory Turnover
7x
Inventory Turnover
Days Sales Outstanding
40 days
Days Sales Outstanding
Fixed Asset Turnover
13x
Fixed Asset Turnover
Total Asset Turnover
2.6x
Total Asset Turnover
Return on Assets
9.10%
Return on Assets
Return on Equity
18.20%
Return on Equity
Debt Ratio
55%
Debt Ratio
Profit Margin on Sales
3.50%
Profit Margin on Sales
P/E Ratio
6x
P/E Ratio
Please show all work for the following questions.
a. Calculate the indicated ratios for Williamâs in the appropriate blanks.
b. Outline Williamâs strengths and weaknesses as compared to its industry. Be detailed in your ratio analysis.
c. Recommend at least three areas for correction. Be sure to support your recommendations.
d. Why is being trustworthy essential to success in the business world? Use at least two of the following scriptures to answer this question: Psalm 101:7, Proverbs 4:20-27, Proverbs 13:11, and Proverbs 28:12-13.
Show ALL work
Ratio Analysis. The Williams Corporationâs forecasted 2010 financial statements follow, along with some industry average ratios.
Forecasted Balance Sheet as of December 31, 2010 | ||||
Cash | $ 72,000 | |||
Accounts receivables | $ 439,000 | Accounts and notes payable | $ 432,000 | |
Inventories | $ 894,000 | Accruals | $ 170,000 | |
Total current assets | $1,405,000 | Total current liabilities | $ 602,000 | |
Land and building | $ 238,000 | Long-term debt | $ 404,290 | |
Machinery | $ 132,000 | Common stock | $ 575,000 | |
Other fixed assets | $ 61,000 | Retained earnings | $ 254,710 | |
Total assets | $1,836,000 | Total liabilities and equity | $1,836,000 |
Forecasted Income Statement for 2010 | ||||
Sales | $4,290,000 | |||
Cost of goods sold | $3,580,000 | Per-Share Data | ||
Gross operating profit | $ 710,000 | EPS | $ 4.71 | |
General admin & selling expenses | $ 236,320 | DPS | $ 0.95 | |
Depreciation | $ 159,000 | P/E Ratio | 5.00 | |
Misc. | $ 134,000 | Market price | $ 23.57 | |
Earnings before Taxes | $ 180,680 | Number of shares outstanding | 23000 | |
Taxes | $ 72,272 | |||
Net Income | $ 108,408 |
Industry Financial Ratios | Williamâs Financial Ratios | Ratio/Comment | ||
Quick Ratio | 1x | Quick Ratio | ||
Current Ratio | 2.7x | Current Ratio | ||
Inventory Turnover | 7x | Inventory Turnover | ||
Days Sales Outstanding | 40 days | Days Sales Outstanding | ||
Fixed Asset Turnover | 13x | Fixed Asset Turnover | ||
Total Asset Turnover | 2.6x | Total Asset Turnover | ||
Return on Assets | 9.10% | Return on Assets | ||
Return on Equity | 18.20% | Return on Equity | ||
Debt Ratio | 55% | Debt Ratio | ||
Profit Margin on Sales | 3.50% | Profit Margin on Sales | ||
P/E Ratio | 6x | P/E Ratio |
Please show all work for the following questions.
a. Calculate the indicated ratios for Williamâs in the appropriate blanks.
b. Outline Williamâs strengths and weaknesses as compared to its industry. Be detailed in your ratio analysis.
c. Recommend at least three areas for correction. Be sure to support your recommendations.
d. Why is being trustworthy essential to success in the business world? Use at least two of the following scriptures to answer this question: Psalm 101:7, Proverbs 4:20-27, Proverbs 13:11, and Proverbs 28:12-13.