Comparative Ratio Analysis Use the comparative data for Sunshine State Equipment Inc. as given in

QUESTION

Comparative Ratio AnalysisUse the comparative data for Sunshine State Equipment, Inc., as given in Problem 22-42. In addition, the year-end price per share of Sunshines stock was $50 for 2006, $25 for 2007, and $35 for 2008.Instructions:1. Compute financial ratios for the three years 20062008 as follows (for ratios normally using average balances, assume that 2005 figures are the same as 2006):(a) Accounts receivable turnover(b) Average collection period(c) Inventory turnover(d) Number of days sales in inventory(e) Fixed asset turnover(f) Debt ratio(g) Debt-to-equity ratio(h) Times interest earned (Assume that Bonds Payable is the only interest-bearing liability.)(i) Earnings per share(j) Price-earnings ratio(k) Book-to-market ratio2. Based on the ratios calculated in (1), evaluate Sunshine State Equipment, Inc., in 2008 as compared with 2007.
A Accounts receivable turnover Accounts Receivable Turnover Ratio = Sales / Average Accounts Receivable 4.67 3.44 4.88 Sales $ 1,400,000.00 $ 1,100,000.00 $ 1,220,000.00 Average Accounts Receivables $ 300,000.00 $ 320,000.00 $ 250,000.00 B Average collection period Average collection period = 365 / Accounts Receivables Turnover 78.21 106.18 74.80 365 365 365 365 Accounts Receivable Turnover 4.67 3.44 4.88 C Inventory turnover Inventory Turnover Ratio = Cost of goods sold / Average Inventories 2 1.43 1.74 Cost of Goods sold $ 760,000.00 $ 600,000.00 $ 610,000.00 Inventories $ 380,000.00 $ 420,000.00 $ 350,000.00 D Number of days sales in inventory Number of days sales in inventory = 365 / Inventory turnover 182.5 255.5 209.4262295 365 365 365 365 Inventory Turnover 2 1.43 1.74 E Fixed asset turnover Fixed asset turnover = Sales/ Fixed Assets 1.84 1.83 1.77 Sales $ 1,400,000.00 $ 1,100,000.00 $ 1,220,000.00 Fixed Assets 760000 600000 690000 F Debt ratio Debt ratio = Total Debt / Total Assets 0.29 0.35 0.36 Total Debt $ 494,000.00 $ 529,000.00 $ 560,000.00 Total Assets $ 1,700,000.00 $ 1,500,000.00 $ 1,550,000.00 G Debt-to-equity ratio Debt to equity =

Debt / Equity 0.41 0.54 0.57 Debt $ 494,000.00 $ 529,000.00 $ 560,000.00 Shareholders equity $ 1,206,000.00 $ 971,000.00 $ 990,000.00 H Times interest earned Time interest earned = EBIT / Interest expenses 11.5 8.166666667 17 EBIT $ 276,000.00 $ 196,000.00 $ 340,000.00 Interest Expense 24000 24000 20000 I Earnings per share EPS = Net income / Shareholders $ 3.60 $ 3.28 $ 5.20 Net income $ 180,000.00 $ 131,000.00 $ 208,000.00 Shareholders 50000 40000 40000 J Price-earnings ratio Price / Earnings Ratio = Market Price per share / Earnings per share 13.89 7.63 6.73 MPS $ 50.00 $ 25.00 $ 35.00 EPS $ 3.60 $ 3.28 $ 5.20 k Book-to-market ratio Book-to-market ratio = Book Value / Market Value 0.2 0.4 0.2857 Book Value $ 10.00 $ 10.00 $ 10.00 Markey Value $ 50.00 $ 25.00 $ 35.00

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