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UABC: Common sizing, solvency, performance ratios

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A. Prepare a comprehensive analysis of UABC for 2011, including the following measures (round all calculations to three decimal places.
1. Short-term solvency ratios (current ratio, acid test, inventory turnover, and days sales in receivables ratios)
2. Long-term solvency ratios (debt-to-equity and times-interest-earned ratios)
3. Performance measurement ratios (asset turnover, return on sales, return on assets, and return on equity ratios)

B. Comment on the financial condition of UABC with respect to short-term solvency, long-term solvency, and performance.

C. Using the data for UABC Company, prepare common size (vertical analysis) statements and evaluate the company's performance in 2011 as compared to 2010. For the balance sheets, use total assets as the base; for the income statements, make one set using sales of each year as the base (vertical analysis) and another set using the year 2010 as the base for both years (horizontal analysis).

D. Comment on the condition of UABC drawing on the common size statements prepared above.

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Your tutorial is 397 words of discussion, a page of ratios computed for 2010 and 2011, and two types of common sized financial statements in excel (on separate tabs).

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See excel for ratios and common sized financial statement (each on separate tab)

A. Prepare a comprehensive analysis of UABC for 2011, including the following measures (round all calculations to three decimal places.
B. Comment on the financial condition of UABC with respect to short-term solvency, long-term solvency, and performance.

1. Short-term solvency ratios (current ratio, acid test, inventory turnover, and days sales in receivables ratios)

The current ratios is over 1 in both years which means they have enough short term assets to handle their upcoming short term obligations. The quick ratio is below 1 but that isn't usually an issue except that it means that inventory would have to be sold to meet upcoming obligations. That's not usually a huge issue. Inventory sells on average in 92 days and this is similar to a hardware store so that's ...

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  • MSc, University of Virginia
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