Prepare a summary on the firms overall financial performance

Reference no: EM131075074

PART 1

Critical Thinking assignment Module

Ratio Analysis

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, 2007
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 Net fixed assets	93,750	531,250
Total assets		$1,250,000
Liabilities and stockholders' 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
Stockholders' equity
Common stock		318,750
Retained earnings		265,000
Total stockholders' equity		$ 583,750
Total liabilities and stockholders' equity		$1,250,000

Income Statement Vanguard Group, Inc. for the Year Ended December 31, 2007
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	2005	2006	2007	2007
Current ratio	1.6	1.7	-	1.6
Quick ratio	0.9	1.0	-	0.9
Inventory turnover	6.0	5.0	-	8.4
Average collection period	40 days	50 days	-	40 days
Total asset turnover	1.5	1.5	-	1.75
Debt ratio	60%	56%	-	50%
Times interest earned	2.5	3.5	-	4.0
Gross profit margin	20%	19.7%	-	20%
Operating profit margin	4.7%	4.8%	-	6%
Net profit margin	2.0%	2.3%	-	3%
Return on investment	3.0%	3.5%	-	5.25%
Return on equity	7.5%	7.95%	-	10.5%

1. Calculate the firm's 2007 financial ratios.

2. Prepare an executive summary on the firm's 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.

PART 2

It is important for companies, particularly retailers, to have strong liquidity. How does the current ratio compare with the quick ratio and why would these two ratios be important for retailers?

2-3 paragraphs with 1-2 sources. APA style

Reference no: EM131075074

Questions Cloud

Explain how veblen dichotomizes business enterprise : Explain how Veblen dichotomizes Business Enterprise into Business and Industry and how this dichotomy explains the conduct of Business Enterprise in a modern industrial economy.

Summarize the article- reasons to smoke : Require:12 timesnewroman Apa exclude cover page one page single spaced several paragraphs summarizing the airticle state the main point of the article and conclusions an evalution of how this material will be helpful in validating or folloeing thr..

Manufacturing overhead budget for the first two quarters : Compute Winslows manufacturing overhead budget for the first two quarters.

Investment bank associated with an underwritten issue : Compare the risks faced by an investment bank associated with an underwritten issue, by comparison with the use of a book building issue.

Prepare a summary on the firms overall financial performance : Prepare an executive summary on the firm's overall financial condition and performance. Your summary must be at least one page, but no more than 3 pages.

Fixed rate mortgage : You have been relocated from Cleveland to San Francisco to begin your new career in finance. The relocation company offers you 3-2-1 Buy Down Financing. The primary home you find has a value of $729,000. You have a 8% down payment on a 30-year Fixed ..

Compute the cash balance at the end : Compute the cash balance at the end of the first year for Alpaca Corporation.

Company cost of equity capital : Dybvig Corporation's common stock has a beta of 1.1. If the risk-free rate is 5.1 percent and the expected return on the market is 13 percent, what is the company's cost of equity capital?

Acceptable project using simple payback period method : What minimum savings in Year-4 are needed to make Alternative-I an acceptable project using Simple Payback Period Method? If the savings in Year-3 and Year-4 for Alternative-II will be equivalent, what size would they have to be in order for the pro..

User Account

All Pages