Case 2: Sam’s Paint and Drywall

                                                                                  

Sam's Paint and Drywall For the year ended December 31, 2019 (In thousands of dollars)
Assets  Â			Liabilities and Net Worth
Cash            Â	$12		AccountsPayable                   Â	$15
Inventory	41		Notes Payable-Bank      Â	4
Accounts Receivable	18		Other                               Â	20
Total Current Assets	71		Total CurrentLiabilities          Â	39
Fixed Assets:			Long TermLiabilities              Â	41
Vehicles	10		                                 Â
Equipment	15		            Â
Building	22
Land	23		Total net worth (Owner’sEquity)         Â	61
Total fixed assets	70		TotalFixed                                     Â	70
Total assets	$141		Total Liability and Net worth        Â	$141

Income Statement for Dec. 31, 2019 (In thousands of dollars) Sales                                        280 Less Cost of GoodsSold          186 Gross Margin onSales           94 Less Operating Expenses      81 Net profit (beforetaxes)        13

Questions:

1. Determine each of the 5 ratios listed in the table below. Notealso that a list of ratios and the equations are included in thisdocument (at the end).
2. Evaluate each ratio against Dun and Bradstreet’s KeyBusiness Ratios on industry norms (given on the followingpage).

	Ratios to Calculate	Dunn & Bradstreet Avg.
	Current Ratio = Current Assets / Current Liabilities	2.7
	Inventory Turnover = Sales / Average Inventory	6.9
	Profit to Sales = Net Profit (B4 tax) / Gross Sales	3.5%
	Return on Investment = Net Profit (B4 Tax) / Owners Equity	21%
	Debt to Equity = Total Debt / Owners Equity	4.3 : 1