XYZ Company sells manufactured goods, on terms of 2/10, net 30. Its financial statements over the last three years are as follows:

2004

2005

2006

Rs.

Rs.

Rs.

Cash

30,000

20,000

5,000

Accounts Receivable

200,000

260,000

290,000

Inventory

400,000

480,000

600,000

Net fixed assets

800,000

800,000

800,000

1,430,000

1,560,000

1,695,000

Accounts Payable

230,000

300,000

380,000

Accruals

200,000

210,000

225,000

Bank Loan, short term

100,000

100,000

140,000

Long term debt

300,000

300,000

300,000

Common Stock

100,000

100,000

100,000

Retained Earnings

500,000

550,000

550,000

1,430,000

1,560,000

1,695,000

Sales

4,000,000

4,300,000

3,800,000

Cost of goods sold

3,200,000

3,600,000

3,300,000

Net Profit

300,000

200,000

100,000

Using the Ratios (calculate ratios and then comments), analyze the company’s financial condition and performance over the last three years. Are their any problem?

Note: Working is required against each ratio not just results:

2004

2005

2006

Current Ratio

Acid Test Ratio

Average collection period

Inventory turnover

Total debt/equity

Long-term debt/total capitalization

Gross profit margin

Net profit margin

Total asset turnover

Return on assets