What ratios and margins should be considered

Reference no: EM133412284

The XYZ company has been in business for over 40years. Sales has been consistent for the last 10 years at $1.9m annually. In addition, the Gross margin has been consistent at 60%. Costs were all consistent- Warehouse costs $110,000, Transportation $80,000, ICC, $150,000 and Other Costs $120,000, Combined Taxes and Interest at $100,000. The Assets were $48,000 for Current Assets, $120,000 for fixed assets. Liabilities were Current is $30,000, Long Term $50,000. Last year the company made a number of changes in the distribution of the product to their customers. This included eliminating a warehouse and using more 3rd party warehousing.

Here is the email you received from the accountant:

Greetings,

I'm very busy with tax season but here is some information you will need: Sales this last year were $2,050,000 and COGS were $850,000. The sale of our Cincinnati warehouse reduced Fixed assets by $50,000 to $70,000 and new warehouse costs are $70,000. The additional mileage and delivery times to the customers increased our transportation costs to $115,000. Inventory carrying costs remained constant at $150,000 which is strange. Other costs to the organization grew to $125,000. Combined Taxes and Interest were same at $100,000. I haven't had a chance to check the profit levels. Current Assets grew to $52,000 but so did Current Liabilities to $34,000. The sale of the asset resulted in Long Term Liabilities decreasing to $30,000. Anyways very busy got to go.

Bob

Question: You have been tasked by the owner to perform SPM analysis of this change and determine whether or not it was successful. What ratios and margins should be considered?

Reference no: EM133412284

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