Access the Company Future Health

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Assessing a Company’s Future Financial Health

Submitted on September 6, 2011

SECTION 1:
Sales Growth
1. During the four-year period ended December 31, 2008. SciTronics’ sales grew at 21% ($244,000/$115,000) = (1+r) ^4 compound rate. There were no acquisitions or divestitures.

Profitability Ratios: How Profitable Is the Company
1. SciTronics’ profits as a percentage of sales in 2008 were 5.73% (14,000/244,000).

2. SciTronics’ profits as a percentage of sales in 2005 was 3.44 %( 5,000/147,000). This represents an increase of 2. 29% from 2005.

3. SciTronics had a total of $112, 000 (75,000+20,000+7,000+10,000) of capital at year-end 2008 and earned before interest but after taxes (EBIAT) 16,000 (26,000-10,000) during 2008. Its return on capital was 14.29% (16,000/112,000) which represents an increase from the 8.11% (6,000/74,000) in 2005.

4. SciTronics had $75,000 of owner’s equity and earned $14,000 after taxes in 2008. Its return on equity was 18.66% ($75,000/$14,000) an improvement from the 8.1% ($5,000/$61,000) earned in 2005.

Activity Ratios
1. Total Assets turnover for SciTronics in 2008 can be calculated by dividing $244,000 (net sales) into $159,000 (total assets). The turnover decreased from 1.58 times in 2005 to 1.53 in 2008.

2. SciTronics had $66,000 in accounts receivables at year end 2008. Its average sales per day were $668.49 ($244,000/365) during 2008 and its average collection period was 98.73 ($66,000/668.49). This represents an improvement from the average collection period of104.29 ($42,000/402.73) days in 2005.

3. SciTronics apparently needed $29,000 (inventories in 2008) of inventory at year end to support its operations during 2008. Its activity during 2008 as measured by the cost of goods sold was $74,000 (COGS). It therefore had an inventory of turnover of 2.55 (74,000/29,000) times. This represents an improvement from 2.04 (43,000/21,000) times in 2005.

4. SciTronics had net fix...
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