Question

(Financial statement analysis) Carson Electronics' management has long viewed BGT Electronics as an industry leader and uses this firm as a model firm for analyzing its own performance. The balance sheets and income statements for the two firms are found here: a. Calculate the following ratios for both Carson and BGT: Current ratio Operating return on assets Times interest earned Debt ratio Inventory turnover Average collection period Total asset turnover Fixed asset turnover Operating profit margin Return on equity b. Analyze the differences you observe between the two firms. Comment on what you view as weaknesses in the performance of Carson as compared to BGT that Carson's management might focus on to improve its operations. a. Calculate the following ratios for both Carson and BGT: Data Table - X Carson's current ratio is (Round to two decimal places.) Cash Accounts receivable Inventories Current assets Net fixed assets Total assets Carson Electronics, Inc. Balance Sheet ($000) $2,020 4,550 1,450 $8,020 15,970 $23,990 BGT Electronics, Inc. Balance Sheet (5000) $1,540 6,040 2,470 $10.050 24,980 $35,030 Accounts payable Accrued expenses Short-term notes payable Current liabilities Long-term debt Owners' equity Total liabilities and owners' equity $2,540 1.050 3,500 $7,090 7,980 8,920 $23,990 $5,050 1,450 1,540 $8,040 4,020 22,970 $35,030 Carson Electronics, Inc. Income Statement (5000) $48,030 (36,020) Net sales (all credit) Cost of goods sold Gross profit Operating expenses Net operating income Interest expense Earnings before taxes Income taxes (40%) Net income $12,010 (8,020) $3.990 (1,100) $2.890 (1,156) $1,734 BGT Electronics, Inc. Income Statement (5000) $69,980 (42,010) $27,970 (11,950) $16,020 (600) $15,420 (6,168) $9.252 Print Done Enter your answer in the answer box and then click Check Answer. 22 parts Clour All Chock Ancu

Answer 1

Computation of financial ratios for the Carson Electronics Inc and BGT Electronics Inc: Particulars Carson BGT Current Ratio: Current Assets / Current liabilities (8020/7090) 1.13 (10050 / 8040) 1.25 Time Interest earned: EBIT/Total Interest Expenses (3990 / 1100) 3.63 (16020/600) 26.70 Inventory Turnover: Сс of goods sold/ Average Inventory (36020/1450) 24.84 (42010/2470) 17.01 Total Assets Turnover: Net Sales/Total Assets (48030/23990) 2.00 (69980/35030) 2.00 Operating Profit Margin: Operating Profit / Sales (3990/48030) 8.31% (16020/69980) 22.89% Operating return on assets: Operating Return/total assets (3990/23990) 0.17 (16020/35030) 0.46 Debt Ratio: Total liabilities / Total assets (7090+7980)/23990 0.63 (8040+4020)/35030 0.34 Average Collection Period(Days sales outstanding): 365 days*accounts receivables/total sales (365*4550/48030) 34.58 (365*6040/69980) 31.50 Fixed Asset Turnover: Total sales / Fixed assets (15970/48030) 0.33 (24980/69980) 0.36 Return on Equity: Net Income/ Shareholder's Equity (1734/8920) 0.19 (9252/22970) 0.40