Analyze Fixed Assets Tabor Industries is a technology company that operates in a highly competitive environment. In 2008, management had significantly curtailed its capital expenditures due to cash flow problems. Tabor reported the following information for 2011: Net fixed assets (beginning of year), $489,000 Net fixed assets (end of year), $505,000 Net sales, $1,065,000 Accumulated depreciation (end of year), $543,000 Depreciation expense, $110,000 An analyst reviewing Tabor's financial history noted that Tabor had previously reported fixed asset turnover ratios and average age of its assets as follows: During this time frame, the industry average fixed asset turnover ratio is 2.46 and the industry average age of assets is 1.79 years. Round your answers to two decimal places. 1. Compute Tabor's fixed asset turnover ratio for 2011. 2. Compute the average age of Tabor's fixed assets for 2011. years 3. Conceptual Connection: Comment on Tabor's fixed asset turnover ratios and the average age of the fixed assets.
Analyze Fixed Assets Tabor Industries is a technology company that operates in a highly competitive environment. In 2008, management had significantly curtailed its capital expenditures due to cash flow problems. Tabor reported the following information for 2011: Net fixed assets (beginning of year), $489,000 Net fixed assets (end of year), $505,000 Net sales, $1,065,000 Accumulated depreciation (end of year), $543,000 Depreciation expense, $110,000 An analyst reviewing Tabor's financial history noted that Tabor had previously reported fixed asset turnover ratios and average age of its assets as follows: During this time frame, the industry average fixed asset turnover ratio is 2.46 and the industry average age of assets is 1.79 years. Round your answers to two decimal places. 1. Compute Tabor's fixed asset turnover ratio for 2011. 2. Compute the average age of Tabor's fixed assets for 2011. years 3. Conceptual Connection: Comment on Tabor's fixed asset turnover ratios and the average age of the fixed assets.
Related questions
| The financial statements for Armstrong and Blair companies are summarized here: |
| Armstrong Company | Blair Company | |||||
| Balance Sheet | ||||||
| Cash | $ | 27,000 | $ | 14,000 | ||
| Accounts Receivable, Net | 32,000 | 22,000 | ||||
| Inventory | 84,000 | 24,000 | ||||
| Equipment, Net | 164,000 | 284,000 | ||||
| Other Assets | 37,000 | 400,000 | ||||
| Total Assets | $ | 344,000 | $ | 744,000 | ||
| Current Liabilities | $ | 84,000 | $ | 34,000 | ||
| Note Payable (long-term) | 44,000 | 354,000 | ||||
| Total Liabilities | 128,000 | 388,000 | ||||
| Common Stock (par $10) | 142,000 | 192,000 | ||||
| Additional Paid-in Capital | 22,000 | 102,000 | ||||
| Retained Earnings | 52,000 | 62,000 | ||||
| Total Liabilities and Stockholdersâ Equity | $ | 344,000 | $ | 744,000 | ||
| Income Statement | ||||||
| Sales Revenue | $ | 426,000 | $ | 786,000 | ||
| Cost of Goods Sold | 237,000 | 397,000 | ||||
| Other Expenses | 152,000 | 307,000 | ||||
| Net Income | $ | 37,000 | $ | 82,000 | ||
| Other Data | ||||||
| Estimated value of each share at end of year | $ | 18 | $ | 27 | ||
| Selected Data from Previous Year | ||||||
| Accounts Receivable, Net | $ | 12,000 | $ | 30,000 | ||
| Inventory | 84,000 | 37,000 | ||||
| Equipment, Net | 164,000 | 284,000 | ||||
| Note Payable (long-term) | 44,000 | 62,000 | ||||
| Total Stockholdersâ Equity | 223,000 | 432,000 | ||||
| The companies are in the same line of business and are direct competitors in a large metropolitan area. Both have been in business approximately 10 years and each has had steady growth. Despite these similarities, the management of each has a different viewpoint in many respects. Blair is more conservative, and as its president said, âWe avoid what we consider to be undue risk.â Both companies use straight-line depreciation, but Blair estimates slightly shorter useful lives than Armstrong. No shares were issued in the current year and neither company is publicly held. Blair Company has an annual audit by a CPA, but Armstrong Company does not. Assume the end-of-year total assets and net equipment balances approximate the yearâs average and all sales are on account. |
| Required: |
| 1. | Calculate the following ratios. |
| TIP: To calculate EPS, use the balance in Common Stock to determine the number of shares outstanding. Common Stock equals the par value per share times the number of shares. (Use 365 days in a year. Round your intermediate calculations and your final answers to 2 decimal places.) |
| Ratio | Armstrong Company | Blair Company | |||
| Tests of Profitability: | |||||
| 1. | Net Profit Margin | 8.69 | % | 10.43 | % |
| 2. | Gross Profit Percentage | % | % | ||
| 3. | Fixed Asset Turnover | ||||
| 4. | Return on Equity | % | % | ||
| 5. | Earnings per Share | ||||
| 6. | Price/Earnings Ratio | ||||
| Tests of Liquidity: | |||||
| 7. | Receivables Turnover | ||||
| Days to Collect | |||||
| 8. | Inventory Turnover | ||||
| Days to Sell | |||||
| 9. | Current Ratio | ||||
| Tests of Solvency: | |||||
| 10. | Debt-to-Assets | ||||
| You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety helmets. Your boss has asked you to perform a comprehensive analysis of the companyâs financial statements, including comparing Lydexâs performance to its major competitors. The companyâs financial statements for the last two years are as follows: |
| Lydex Company Comparative Balance Sheet | ||||
| This Year | Last Year | |||
| Assets | ||||
| Current assets: | ||||
| Cash | $ | 1,000,000 | $ | 1,240,000 |
| Marketable securities | 0 | 300,000 | ||
| Accounts receivable, net | 2,860,000 | 1,960,000 | ||
| Inventory | 3,640,000 | 2,400,000 | ||
| Prepaid expenses | 270,000 | 210,000 | ||
| Total current assets | 7,770,000 | 6,110,000 | ||
| Plant and equipment, net | 9,600,000 | 9,090,000 | ||
| Total assets | $ | 17,370,000 | $ | 15,200,000 |
| Liabilities and Stockholders' Equity | ||||
| Liabilities: | ||||
| Current liabilities | $ | 4,050,000 | $ | 3,060,000 |
| Note payable, 10% | 3,700,000 | 3,100,000 | ||
| Total liabilities | 7,750,000 | 6,160,000 | ||
| Stockholders' equity: | ||||
| Common stock, $75 par value | 7,500,000 | 7,500,000 | ||
| Retained earnings | 2,120,000 | 1,540,000 | ||
| Total stockholders' equity | 9,620,000 | 9,040,000 | ||
| Total liabilities and stockholders' equity | $ | 17,370,000 | $ | 15,200,000 |
| Lydex Company Comparative Income Statement and Reconciliation | ||||
| This Year | Last Year | |||
| Sales (all on account) | $ | 15,900,000 | $ | 13,980,000 |
| Cost of goods sold | 12,720,000 | 10,485,000 | ||
| Gross margin | 3,180,000 | 3,495,000 | ||
| Selling and administrative expenses | 1,410,000 | 1,620,000 | ||
| Net operating income | 1,770,000 | 1,875,000 | ||
| Interest expense | 370,000 | 310,000 | ||
| Net income before taxes | 1,400,000 | 1,565,000 | ||
| Income taxes (30%) | 420,000 | 469,500 | ||
| Net income | 980,000 | 1,095,500 | ||
| Common dividends | 400,000 | 547,750 | ||
| Net income retained | 580,000 | 547,750 | ||
| Beginning retained earnings | 1,540,000 | 992,250 | ||
| Ending retained earnings | $ | 2,120,000 | $ | 1,540,000 |
| To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Companyâs industry: |
| Current ratio | 2.3 | ||||||||||||||||||||||||||||||||||||||||||||
| Acid-test ratio | 1.1 | ||||||||||||||||||||||||||||||||||||||||||||
| Average collection period | 32 | days | |||||||||||||||||||||||||||||||||||||||||||
| Average sale period | 60 | days | |||||||||||||||||||||||||||||||||||||||||||
| Return on assets | 9.7 | % | |||||||||||||||||||||||||||||||||||||||||||
| Debt-to-equity ratio | .65 | ||||||||||||||||||||||||||||||||||||||||||||
| Times interest earned ratio | 5.7 | ||||||||||||||||||||||||||||||||||||||||||||
| Price-earnings ratio | 10 | ||||||||||||||||||||||||||||||||||||||||||||
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