Renegade\'s Pet Paradise has the completed its balance sheet and income statemen
ID: 2549065 • Letter: R
Question
Renegade's Pet Paradise has the completed its balance sheet and income statement (See worksheet "FinStmnts"). Based on this information, determine the ratios. In addition to the ratio analysis, look over the results and state whether or not you would invest in this company. Support your response based on the numbers provided, including ratios. Include a STEEP* analysis to help present a complete picture. Use complete sentences and proper grammar. You are presenting this to the Board of Directors. Remember they decide whether to keep management on the team or replace current management with new agents. In addition to supporting your recommendation with facts, communication skills are highly reviewed in evaluating management and its proposals.
BS & I/S
Show steps please.
Explanation / Answer
Ans.(a) Working Capital = Current Asset - Current Liability = $150,200 - $83,500 = $66,700 Ans.(b) Current Ratio = Current Asset / Current Liability = $150,200 / $83,500 = 1.80 Times Ans.(c) Inventory Turnover = Cost of Goods Sold / Average Inventory = $23,000 / {($84,000 + $78,000)/2} = $23,000 / $81,000 = 0.28 Times Ans.(d) Average day's to sell Inventory = 365 / Inventory Turnover Ratio = 365 / 0.28 = 1303.57 Ans.(e) Debt to Assets = Total Debt / Total Asset = $103,500 / $221,000 = 0.47 = 47% Ans.(f) Debt to Equity = Total Liabilities / Shareholder's Equity = $103,500 / $117,500 = 0.88 Ans.(g) (Net) Margin = Net Profit / Total Revenue = $11,770 / $48,000 = 0.25 = 25% Ans.(h) Asset Turnover = Net Sales / Average Total Assets = $48,000 / {(221,000 + $207,300) / 2} = $48,000 / $214,150 = 0.22 Ans.(i) ROI = Net Margin x Turnover = $48,000 x 25% = $12,000 Ans.(j) ROE = Net Profit / Shareholder's Equity = $11,770 / $117,500 = 0.1