Products Company’s Balance Sheet

Using the following data for Jackson Products Company, answer Parts a through g:Jackson Products Company’s Balance Sheet December 31, 2013Cash $ 240,000Accounts payable $ 380,000Accounts receivable 320,000Notes payable (9%) 420,000Inventory 1,040,000Other current liabilities 50,000Total current assets $1,600,000Total current liabilities $ 850,000Net plant and equipment 800,000Long-term debt (10%) 800,000Total assets $2,400,000Stockholders’ equity 750,000Total liabilities and stockholders’ equity $2,400,000Income Statement for the Year Ended December 31, 2013Net sales (all on credit) $3,000,000Cost of sales 1,800,000Gross profit $1,200,000Selling, general, and administrative expenses 860,000Earnings before interest and taxes $340,000Interest: Notes $37,800 Long-term debt 80,000 Total interest charges 117,800Earnings before taxes $222,200Federal income tax (40%) 88,880Earnings after taxes $133,320Industry Averages Current ratio 2.5:1Quick ratio 1.1:1Average collection period (365-day year) 35 days Inventory turnover ratio 2.4 timesTotal asset turnover ratio 1.4 times Timesinterest earned ratio 3.5 timesNet profit margin ratio 4.0%Return on investment ratio 5.6%Total assets/stockholders’ equity (equity multiplier) ratio 3.0 timesReturn on stockholders’ equity ratio 16.8%P/E ratio 9.0 timesa. Evaluate the liquidity position of Jackson relative to that of the average firm in the industry. Consider the current ratio, the quick ratio, and the net working capital (current assets minus current liabilities) for Jackson. What problems, if any, are suggested by this analysis?b. Evaluate Jackson’s performance by looking at key asset management ratios. Are any problems apparent from this analysis?c. Evaluate the financial risk of Jackson by examining its times interest earned ratio and its equity multiplier ratio relative to the same industry average ratios.d. Evaluate the profitability of Jackson relative to that of the average firm in its industry.e. Give an overall evaluation of the performance of Jackson relative to other firms in its industry.f. Perform a DuPont analysis for Jackson. What areas appear to have the greatest need for improvement?g. Jackson’s current P/Eratiois7times.Whatfactor(s)are most likely to account for this ratio relative to the higher industry average ratio?