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- From: Business, Business Statistics
- Posted on: Sun 01 Feb, 2015
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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
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.
Answer:
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
Solution Description

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.