HH Company Financial?
HH Company
Using the financial statements for HH Company below:
| Sales | 1,067,500 |
| Cost of goods sold |
1,392,500 |
| Selling, general and administrative |
145,000 |
| Earnings before interest and taxes (EBIT) |
70,000 |
| Federal and state income taxes (40%) |
18,200 |
| Net income |
27,300 |
HH Company
Balance Sheet as of December 31, 20XX
|
Assets |
80,500 |
Accounts Payable |
132,000 |
|
Accounts Receivable |
334,500 |
Current portion of debt |
84,000 |
|
Inventories |
240,000 |
Other current liabilities |
114,000 |
|
Total current assets |
655,000 |
Total current liabilities |
330,000 |
|
Net fixed assets |
292,500 |
Long-term debt |
256,500 |
|
Total assets |
947,500 |
Total liabilities |
586,500 |
|
Common equity |
361,000 |
||
|
Total Liabilities & Equity |
947,500 |
1. Calculate the indicated ratios for HH.
| Company Averages | Industry Averages | |
| Current Ratio | 2.2 | |
| Days sales outstanding (based on 365-day year) | 36 days | |
| Inventory turnover | 6.7 | |
| Fixed asset turnover | 12.1 | |
| Total assets turnover | 3.00 | |
| Return on sales | 1.20% | |
| Return on assets | 3.60% | |
| Return on equity | 9.00% | |
| Debt ratio | 55% |
2. Discuss HH’s strengths and weaknesses as revealed by your analysis.
3. Suppose HH doubles its sales as well as its inventories, accounts receivable, and common equity during the year. How would that information affect the validity of your ratio analysis?
Your paper should be three pages in length (excluding cover page and references) and formatted according to the CSU-Global Guide to Writing and APA Requirements. Be sure to discuss and reference concepts taken from the assigned textbook reading and relevant research. Review the grading rubric to see how you will be graded for this assignment
