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week2ratioanalysishomeworkupdated2017.doc
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Ratio Analysis
(Individual Assignment)
You may use excel or word.doc format for this assignment.
1. Analysis of cost of goods sold problem.
1992
Gross Profit Margin
60%
1993
1994
55%
51%
What is happening to cost of goods sold? As was done in the week 2 online lecture on
ratio analysis, please assume sales of 1 dollar each year as you do your analysis. You
need to show the cost of goods as pennies per dollar of sales. This problem follows the
process shown in the online lecture section titled: “Another Income Statement
Analytical Approach: Percent of Sales”
(10 points)
2. Overhead (or Sales, General and Administrative Expense) problem.
1992
1993
1994
Gross Profit Margin
40%
39% 41%
Operating Margin (NOI/Sales)
15%
10%
5%
What is happening to S,G and A (or overhead expenses)? Please set up an illustration
assuming sales of 1.00 dollar each year just as you did in problem number one. You need
to show cost of goods and S,G and A (or overhead expenses) as pennies per dollar of
sales.
(10 points)
3. Balance Sheet Problem
1992
Annual Sales Growth (over prior yr)
Current Ratio
Average Collection Period
+ 1%
3.5X
1993
0%
2X
1994
+1%
1.2X
25 days 30 days 55 days
What is happening to liquidity? What are some follow-up questions your would ask?
(10 points)
4. Using the data provided below, which is the better managed company? Why? Please
support your answers by calculating appropriate ratios. You can find the ratios and
formulas for these ratios in the week two online lecture on ratio analysis. (10 points)
Company A
Sales
Company B
10 million dollars
20 million dollars
Net Income
1 million dollars
2 million dollars
Total Assets
10 million dollars
15 million dollars
…
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