Reference no: EM132809798

The balance sheet and income statement for the J. P. Robard Mfg. Company are as follows:

balance sheet

Cash $ 500

Accounts receivable 2,000

Inventories 1,000

Current assets 3,500

Net fixed assets 4,500

Total assets $8,000

Accounts payable $1,100

Accrued expenses 600

Short-term notes payable 300

Current liabilities $2,000

Long-term debt 2,000

Owners' equity 4,000

Total liabilities and owner's' equity $8,000

Income Statement ($000)

Net sales (all credit) $8,000

Cost of goods sold (3,300)

Gross profit 4,700

Operating expenses

(includes $500 depreciation) (3,000)

Operating income 1,700

Interest expense (367)

Earnings before taxes $1,333

Income taxes (40%) (533)

Net income $ 800

Problem A) Calculate and interpret the financial ratios for 2019 corresponding to the industry norms provided as follows:

INDUSTRY NORMS

Current ratio 1.5: 1

Inventory turnover 3 x

Total asset turnover 1 x

Operating profit margin 18%

Operating income return on investment 18%

Debt ratio 60%

Average collection period 100 days

Fixed asset turnover 1.5 :1

Return on equity 15%

Problem B) The company is applying for Bank Loan, do you recommend the bank Gulf Bank PLC for sanction of Loan.

Problem C) Would you recommend investment in this company? Similar companies pay 12% return. Calculate any other ratio you think appropriate. make an report.