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MINI CASE FINANCIAL RATIO ANALYSIS
You have been hired as an assistant to Judy Hiltz, C-Star’s President & CEO who has the task of returning the company to a sound financial position. The 2008, 2009 and 2010 balance sheets and income statements are presented below along with the financial ratios for 2008, 2009 and 2010. The industry averages for these ratios are also provided. Balance Sheets 2008 2009 2010

Assets
Cash $ 57,600 $ 27,282 $ 85,632
Accounts Receivable 351,200 632,160 878,000
Inventories 715,200 1,287,360 1,716,480
Total Current Assets 1,124,000 1,946,802 2,680,112
Gross Fixed Assets 491,000 1,202,950 1,220,000
Less: Accumulated Depreciation 146,200 263,160 383,160
Net Fixed Assets 344,800 939,790 836,840
Total Assets 1,468,800 2,886,592 3,516,952
Liabilities and Equity
Accounts Payable 281,600 608,960 739,800
Short-term debt 200,000 720,000 300,000
Total Current Liabilities 481,600 1,328,960 1,039,800
Long-term Debt 323,432 1,000,000 500,000
Common Stock 460,000 460,000 1,680,936
Retained Earnings 203,786 97,632 296,216
Total Equity 663,786 557,632 1,997,152
Total Liabilities and Equity 1,468,800 2,886,592 3,516,952
Income Statements 2008 2009 2010
Sales $3,432,000 $5,834,400 $7,035,600
Cost of goods sold 2,864,000 4,980,000 5,800,000
Gross Profit 568,000 854,400 1,235,600
Other expenses 340,000 720,000 612,960
Depreciation 18,900 116,960 120,000
EBIT (Operating Profit) 209,100 17,440 502,640
Interest expense 62,500 176,000 80,000
EBT 146,600 (158,560) 422,640
Taxes (40%) 58,640 (63,424) 169,056
Net Income 87,960 (95,136) 253,584
Stock Data
Stock Price $8.50 $6.00 $12.17
Shares Outstanding 100,000 100,000 250,000
EPS 0.880 (0.951) 1.014
Book value per share $6.64 $5.58 $7.91
Ratio Analysis
2008 2009 2010 Industry
Liquidity ratios
Current ratio 2.3x 1.5x 2.7x
Quick ratio 0.8x 0.5x 1.0x
Activity ratios
Receivables turnover 9.8x 9.2x 11.4x
Average collection period (days) 37 40 32
Inventory turnover 4.8x 4.5x...
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