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Ratio Analysis Problems
Ratio Analysis
(Individual Assignment)
You may use excel or word.doc format for this assignment.
Please post your homework as a word.doc or excel file in the class
discussion section below by the due date.
1. Analysis of cost of goods sold problem.
1992
1993 1994
Gross Profit Margin
60% 55%
51%
What is happening to cost of goods sold? As was done in the week 2
online lecture on ratio analysis, please assume sales of 1 dollar each year
as you do your analysis. This problem follows the process shown in the
Week 2 Ratio Analysis online lecture section titled: "Another Income
Statement Analytical Approach: Percent of Sales"
(5 points)
2. Overhead (or Sales, General and Administrative Expense) problem.
1992
1993 1994
Gross Profit Margin
40%
39% 41%
Operating Margin (NOI/Sales)
15%
10%
5%
What is happening to S,G and A (or overhead expenses)? Please set up
an illustration assuming sales of 1.00 dollar each year just as you did in
problem number one.
(5 points)
3. Balance Sheet Problem
1992
1993 1994
Annual Sales Growth (over prior yr)
+ 1%
0% +1%
Current Ratio
3.5X
2X
1.2X
Average Collection Period
25 days 30 days 55
days
What is happening to liquidity? Why? What are some follow-up questions
your would ask? (5 points)
4. Using the data provided below, which is the better managed company?
Why? Please support your answers by calculating appropriate ratios. (5
points)
Company A
Company B