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Case 2: Sams Paint and Drywall

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

Income Statement for Dec. 31, 2019 (In thousands of dollars) Sales 280 Less Cost of Goods Sold 186 Gross Margin on Sales 94 Less Operating Expenses 81 Net profit (before taxes) 13

Questions:

1. Determine each of the 5 ratios listed in the table below. Note also that a list of ratios and the equations are included in this document (at the end).
2. Evaluate each ratio against Dun and Bradstreets Key Business Ratios on industry norms (given on the following page).

	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

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