Ryan boot company analysis. | Business & Finance homework help

Problem:

A. Analyze Ryan Boot Company, using ratio analysis. Compute the ratios.

B. In your analysis, calculate the overall break-even point in sales dollars and the cash break-even point.

 Ryan Boot Company Analysis Ratios Ryan Boot Industry Profit margin \$292,500 ÷ 7,000,000 4.18% 5.75% Return on assets \$292,500 ÷ 8,130,000 3.60% 6.90% Return on equity \$292,500 ÷ 2,880,000 10.16% 9.20x Receivables turnover \$7,000,000 ÷ 3,000,000 2.33x 4.35x Inventory turnover \$7,000,000 ÷ 1,000,000 7.00x 6.50x Fixed asset turnover \$7,000,000 ÷ 4,000,000 1.75x 1.85x Total asset turnover \$7,000,000 ÷ 8,130,000 0.86x 1.20x Current ratio \$4,130,000 ÷ 2,750,000 1.50x 1.45x Quick ratio \$3,130,000 ÷ 2,750,000 1.14x 1.10x Debt to total assets \$5,250,000 ÷ 8,130,000 64.58% 25.05% Interest coverage \$700,000 ÷ 250,000 2.80x 5.35x Fixed charge coverage (\$700,000 + \$200,000)/\$250,000 + \$200,000 + (\$65,000/ (1-.35)  = \$900,000/\$550,000 1.64x 4.62x

B. BEP in sales dollars

First we must calculate the contribution margin.

CM = Sales – Variable expenses

CM = \$7,000,000 – 4,200,000

CM = \$2,800,000

Contribution Margin Ratio = CM ÷ Sales

CMR = \$2,800,000 ÷ 7,000,000

CMR = 40%

BEP = Total Fixed Assets ÷ CMR

BEP = \$2,100,000 ÷ 40%

BEP = \$5,250,000 in sales dollars

Cash BEP = same as above accept the non cash expenses would be removed from the fixed assets per the instructor help.

Cash BEP = (TFA – Non Cash expenses) ÷ CMR

Cash BEP = (\$2,100,000 – 500,000) ÷ 40%

Cash BEP = \$1,600,000 ÷ 40%

Cash BEP = \$4,000,000