Description
Use the Data for Case Study 1 file(attached), which includes 3 years of income statements and 3 years of balance sheet information.
Scenario: You are a banker. The CFO of The Best Used Book Store is asking for a $100,000 loan. He explains that the company has successfully grown its inventory and has a current year return on equity of 15.1%. Sales grew 6% last year, and they are in need of additional working capital. Calculate the following financial ratios for the prior 3 years. (Go to Files for data.)
Net profit margin
Gross profit margin
Operating expense as a percent of sales
Return on assets
Current ratio
Quick ratio
Return on equity
Debt to equity
Debt to assets
Based on your analysis of the 3 years of information, describe the condition of the company. Is it healthy? Why or why not?
What are your concerns about the company? Would you approve the loan? Why or why not?
It should be submitted as a single Word document. Along with a narrative, you should include tables with the ratios shown.
Unformatted Attachment Preview
The Best Used Book Store
Income Statement
Sales
COGS
Gross Profit
$
$
$
2022
800,000
380,000
420,000
$
47.5% $
52.5% $
2023
850,000
420,000
430,000
Operating Expense
Payroll
Benefits
Rent
Utilities
Telephone
Insurance
Supplies
Advertising
Depreciation
Interest Expense
Total Expenses
$
$
$
$
$
$
$
$
$
$
$
Pre-tax Profit
Taxes
Net Profit
$
$
$
$
49.4% $
50.6% $
2024
900,000
460,000
440,000
51.1%
48.9%
150,000
18,000
12,000
24,000
3,000
1,800
5,600
25,000
37,500
26,400
303,300
18.8% $
2.3% $
1.5% $
3.0% $
0.4% $
0.2% $
0.7% $
3.1% $
4.7% $
3.3% $
37.9% $
170,000
20,400
12,500
28,000
3,100
1,800
6,000
35,000
37,500
22,400
336,700
20.0% $
2.4% $
1.5% $
3.3% $
0.4% $
0.2% $
0.7% $
4.1% $
4.4% $
2.6% $
39.6% $
200,000
24,000
13,000
36,000
3,000
2,100
6,300
35,000
37,500
18,400
375,300
22.2%
2.7%
1.4%
4.0%
0.3%
0.2%
0.7%
3.9%
4.2%
2.0%
41.7%
116,700
(40,845)
75,855
14.6% $
-5.1% $
9.5% $
93,300
(32,655)
60,645
11.0% $
-3.8% $
7.1% $
64,700
(22,645)
42,055
7.2%
-2.5%
4.7%
The Best Used Book Store
Balance Sheet
Assets
Current Assets
Cash
Accounts Receivable
Inventory
Total Current Assets
2022
2023
2024
48,355
40,000
400,000
488,355
16,500
80,000
500,000
596,500
11,055
240,000
550,000
801,055
Fixed Assets
Vehicles
Less Depreciation
Equipment
Less Depreciation
Total Fixed Assets
30,000
(7,500)
300,000
(30,000)
292,500
30,000
(15,000)
300,000
(60,000)
255,000
30,000
(22,500)
300,000
(90,000)
217,500
Total Assets
780,855
851,500
1,018,555
Liabilities and Owners Equity
Current Liabilities
Accounts Payable
Taxes Payable
Total Current Liabilities
300,000
25,000
325,000
350,000
35,000
385,000
500,000
60,000
560,000
Long-term Debt
Total Liabilities
280,000
605,000
230,000
615,000
180,000
740,000
Owners Equity
Paid-in Capital
Retained Earnings
Total Equity
100,000
75,855
175,855
100,000
136,500
236,500
100,000
178,555
278,555
Total Liabilities & Owners Equity
780,855
851,500
1,018,555
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