The Vanguard Group, Inc. has compiled the following financial statements and comparative financial
ratios for the year-end review.
Balance Sheet
Vanguard Group, Inc.
December 31, 2015
Assets
Current assets
Cash $ 118,750
Accounts receivable 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
Liabilities and stockholdersâ equity
Current liabilities
Accounts payable $ 111,250
Notes payable 211,250
Accruals 108,750
Total current liabilities $ 431,250
Long-term debt 235,000
Total liabilities $ 666,250
Stockholdersâ equity
Common stock 318,750
Retained earnings 265,000
Total stockholdersâ equity $ 583,750
Total liabilities and stockholdersâ equity $1,250,000
Income Statement
Vanguard Group, Inc.
for the Year Ended December 31, 2015
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.
Industry
Average
Ratio 2013 2014 2015 Industry Avg.
Current ratio 1.6 1.7 --- 1.6
Quick ratio 0.9 1.0 â 0.9
Inventory turnover 6.0 5.0 â 8.4
Average collection period 40 days 50 days â 40 days
Debt ratio 60% 56% â 50%
Net profit margin 2.0% 2.3% â 3%
Return on equity 7.5% 7.95% â 10.5%
Required:
a. Calculate the firmâs 2015 financial ratios.
b. Provide a brief (one or two paragraphs) analysis of the firmâs performance from both time-series and cross-sectional viewpoints.
The Vanguard Group, Inc. has compiled the following financial statements and comparative financial
ratios for the year-end review.
Balance Sheet
Vanguard Group, Inc.
December 31, 2015
Assets
Current assets
Cash $ 118,750
Accounts receivable 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
Liabilities and stockholdersâ equity
Current liabilities
Accounts payable $ 111,250
Notes payable 211,250
Accruals 108,750
Total current liabilities $ 431,250
Long-term debt 235,000
Total liabilities $ 666,250
Stockholdersâ equity
Common stock 318,750
Retained earnings 265,000
Total stockholdersâ equity $ 583,750
Total liabilities and stockholdersâ equity $1,250,000
Income Statement
Vanguard Group, Inc.
for the Year Ended December 31, 2015
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.
Industry
Average
Ratio 2013 2014 2015 Industry Avg.
Current ratio 1.6 1.7 --- 1.6
Quick ratio 0.9 1.0 â 0.9
Inventory turnover 6.0 5.0 â 8.4
Average collection period 40 days 50 days â 40 days
Debt ratio 60% 56% â 50%
Net profit margin 2.0% 2.3% â 3%
Return on equity 7.5% 7.95% â 10.5%
Required:
a. Calculate the firmâs 2015 financial ratios.
b. Provide a brief (one or two paragraphs) analysis of the firmâs performance from both time-series and cross-sectional viewpoints.
Related questions
Ratio Analysis
The Vanguard Group, Inc. has compiled the following financial statements and comparative financial ratios for the year-end review.
| Balance Sheet | ||
| Assets | ||
| Current assets | ||
| âCash | $ 118,750 | |
| âAccounts receivable | 296,250 | |
| âInventory | 303,750 | |
| âTotal current assets | $ 718,750 | |
| Gross fixed assets | $625,000 | |
| Less: Accumulated depreciation | 93,750 | |
| Net fixed assets | 531,250 | |
| Total assets | $1,250,000 | |
| Liabilities and stockholdersâ equity | ||
| Current liabilities | ||
| âAccounts payable | $ 111,250 | |
| âNotes payable | 211,250 | |
| âAccruals | 108,750 | |
| ââTotal current liabilities | $ 431,250 | |
| Long-term debt | 235,000 | |
| ââTotal liabilities | $ 666,250 | |
| Stockholdersâ equity | ||
| âCommon stock | 318,750 | |
| âRetained earnings | 265,000 | |
| ââTotal stockholdersâ equity | $ 583,750 | |
| Total liabilities and stockholdersâ equity | $1,250,000 | |
| Income Statement | |||
| 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 | ||
| âââTotal 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 | ||||
| Industry Average | ||||
| Ratio | 2005 | 2006 | 2007 | 2007 |
| Current ratio | 1.6 | 1.7 | â | 1.6 |
| Quick ratio | 0.9 | 1.0 | â | 0.9 |
| Inventory turnover | 6.0 | 5.0 | â | 8.4 |
| Average collection period | 40 days | 50 days | â | 40 days |
| Total asset turnover | 1.5 | 1.5 | â | 1.75 |
| Debt ratio | 60% | 56% | â | 50% |
| Times interest earned | 2.5 | 3.5 | â | 4.0 |
| Gross profit margin | 20% | 19.7% | â | 20% |
| Operating profit margin | 4.7% | 4.8% | â | 6% |
| Net profit margin | 2.0% | 2.3% | â | 3% |
| Return on investment | 3.0% | 3.5% | â | 5.25% |
| Return on equity | 7.5% | 7.95% | â | 10.5% |
1. Prepare an executive summary on the firmâs 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.
