Ryan boot company analysis. | Business & Finance homework at Essay Blazers

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

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