Bab 5-Financial Analysis Tools
Using the data below:
Aspen Industries
Income Statement
For the Years Ended December 31,2004 and 2003
2004
2003
Sales
285,000
190,000
Cost of Goods Sold
215,000
143,000
$
$
Gross Profit
70,000.00
47,000.00
Operating Expenses
Variable Expenses
28,500
19,000
Fixed Expenses
21,000
20,000
Depreciation
10,000
4,500
$
$
Total
59,500.00
43,500.00
Earnings Before Interest and Taxes
Interest Expenses
Earnings Before Taxes
10,500
6,100
4,400
$
1,540.00
$
2,860.00
Taxes
Net Income
Notes:
Tax Rate
Payout Ratio
Dividends
3,500
3,000
500
$
175.00
$
325.00
35%
30%
858
Aspen Industries
Balance Sheet
As of December 31,2004 and 2003
Assets
Cash
Accounts Receivable
Inventories
Total Current Assets
Land
Buildings and Equipment
Accumulated Deprecation
Total Fixed Assets
2004
2003
4,000
16,000
42,500
9,000
12,500
29,000
$
62,500.00
26,000
100,000
-38,000
$
88,000.00
$
50,500.00
20,000
70,000
-28,000
$
62,000.00
Total Assets
Liabilities and Owner's Equity
Accounts Payable
Short-term Bank Notes
Total Current Liabilities
Long-term Debt
Common Stock
Retained Earnings
Total Liabilities and Owner's
Equity
$
150,500.00
$
112,500.00
22,298
47,000
$
69,298.00
10,500
17,000
$
27,500.00
22,950
31,500
26,752
$
150,500.00
28,750
31,500
24,750
$
112,500.00
COMPLETED RATIO WORKSHEET FOR EPI
Ratio
2004
Liquidity Ratios
2.39x
0.84x
Efficiency Ratios
Inventory Turnover
3.89x
A/R Turnover
9.58x
Average Collection Period
37.59 days
Fixed Assets Turnover
10.67x
Total Assets Turnover
2.33x
Leverage Ratios
Total Debt Ratio
58.45%
Long-term Debt Ratio
25.72%
LTD to Total Capitalization
38.23%
Debt to Equity
1.41x
LTD to Equity
61.90%
Coverage Ratios
Times Interest Earned
1.97x
Cash Coverage Ratio
2.23x
Profitability Ratios
Gross Profit Margin
15.58%
Operating Profit Margin
3.89%
Net Profit Margin
1.15%
Return on Total Assets
2.68%
Return on Equity
6.45%
Return on Common Equity
6.45%
Current
Quick
Du Pont ROE
6.45%
2003
2.33x
0.85x
4.00x
9.77x
36.84 days
9.95x
2.34x
54.81%
22.02%
32.76%
1.21x
48.73%
3.35x
3.65x
16.55%
6.09%
2.56%
5.99%
13.25%
13.25%
13.25%
a. Set up a ratio worksheet similar to the one in the completed ratio, and calculate all
of the ratios for Aspen Industries
b. Aspen Industries has shown an accounting profit in each of the past two years.
Calculate their economic profit for these years. Calculate their profit for these
years and compare it to net income. Assume that Aspen’s cost of capital is 11%.