Ratio Analysis Problems Ratio Analysis (Individual Assignment) You may use excel or word.doc format for this assignment. Please post your homework as a word.doc or excel file in the class discussion section below by the due date. 1. Analysis of cost of goods sold problem. 1992 � 1993 1994 � Gross Profit Margin 60% �55% �51% What is happening to cost of goods sold? As was done in the week 2 online lecture on ratio analysis, please assume sales of 1 dollar each year as you do your analysis. This problem follows the process shown in the Week 2 Ratio Analysis online lecture section titled: “Another Income Statement Analytical Approach: Percent of Sales” (5 points) 2. Overhead (or Sales, General and Administrative Expense) problem. 1992 � 1993 1994 Gross Profit Margin 40% � 39% 41% Operating Margin (NOI/Sales) 15% � 10% � 5% What is happening to S,G and A (or overhead expenses)? Please set up an illustration assuming sales of 1.00 dollar each year just as you did in problem number one. (5 points) 3. Balance Sheet Problem � � � � � � � � � � � � � � � 1992 � 1993 1994 Annual Sales Growth (over prior yr) + 1% � 0% �+1% Current Ratio � � � � � � � � � � � 3.5X � 2X � 1.2X Average Collection Period � � � � � � � 25 days 30 days 55 days What is happening to liquidity? Why? What are some follow-up questions your would ask? (5 points) 4. Using the data provided below, which is the better managed company? Why? Please support your answers by calculating appropriate ratios. (5 points) � � � � � �Company A Company B Sales � � 10 million dollars � � � �20 million dollars Net Income 1 million dollars � � � � 2 million dollars Total Assets �10 million dollars 15 million dollars Click the Assignment Files tab to submit your assignment.
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