Steve Bunns Accounting Final Project

1
Steve Bunns Accounting Final Project

• Ratio Analysis

2
Chapin Manufacturing Ratios
3
Ratio Chart
4
Profitability Ratios

• Division A has return rates of 9, 18.6, and
  27.7 for Sales, Assets, and Equity,
  respectively.
• Division B boasts return rates of 16.8, 30.3,
  and 35.9 for Sales, Assets, and Equity,
  respectively.
• Division C includes return rates of 16.5,
  28.5, and 36.3 for Sales, Assets, and Equity,
  respectively.
• The Corporation overall has return rates of
  14.3, 26.4, and 34.1 for Sales, Assets, and
  Equity, respectively.
• All of these return rates seem pretty high,
  especially the equity return rates. This
  indicates that the corporation is definitely
  profitable. Division A is noticeably lower than
  the rest of the Divisions though and should
  probably improve.

5
Current Financial Condition

• The Current Rates of 2.4, 3.26, and 3.16 for
  Divisions A, B, and C, respectively are very
  healthy.
• This means that the divisions and corporation
  have more than twice as much current assets than
  current liabilities, and could easily pay off any
  current debt. They can probably even afford to
  take on a little more debt and put some more of
  their assets to use generating revenue.
• Similarly, the Quick Rates of 1.39, 1.85, and
  1.78 for Divisions A, B, and C, respectively are
  also healthy.
• Thus, even in a more severe test of ability to
  pay off debt, the divisions all have healthy
  ratios. This means the corporation is also in a
  favorable position.

6
Current Financial Condition

• The Average Collection Periods of 42, 32, and 36
  days for Divisions A, B, and C, respectively,
  seem close to normal. All 3 Divisions are being
  paid for past purchases within a month and a
  half. Maybe it would be better if they could be
  paid within 1 month.
• The Average Days Inventory seems normal. Except
  that Division C could improve from 72 days to
  some figure close to those of Division A with 65
  days and Division C with 63 days.

7
Long-term Financial Condition

• The Debt to Asset ratios vary from division to
  division. Division A has the highest leverage
  with about 40 of its assets being financed
  through debt. Division B and C are pretty close
  with ratios of 18.8 and 25.4, respectively.
• This means that the bulk of the corporations
  assets are financed by equity. Maybe the
  corporation could afford to take on a few more
  liabilities most likely in either Division B or
  C, since Division A is already significantly
  higher than either one.