Running head: RATIO ANALYSIS: KUDLER FINE FOODS

Ratio Analysis: Kudler Fine Foods

Randa Polk
Denise Pittman
Jason Fritz
Froylan Villalobos
ACC/291
March 26, 2012
Michael J. Mosley
Liquidity Ratios
1. Current Ratio
Current Ratio = Current Assets / Current Liabilities
=$1,971,000 / $116,290
=16.95: 1
2. Acid-Test Ratio
Acid-Test Ratio = [Cash + Short-term Investments + Receivables (Net)] / Current
Liabilities
=($1,430,000 + $0 + $86,000) / $116,290
=13.04: 1
3. Receivables Turnover
Receivables Turnover = Net Credit Sales / Average Net Receivables
=$10,796,200 / [(86,000 + 0) / 2]
=$10,796,200 / $86,000
=125.5 times
4. Inventory Turnover
Inventory Turnover = Cost of Goods Sold / Average Inventory
=$8,474,831 / [$467,890 + $429,090) / 2]
=$8,474,831 / $448,490
=18.9 times
Profitability Ratios

Ratio Analysis: Kudler Fine Foods

AssetTurnoverRevenue/assets$10,804,000/$2,675,250=4.04
ProfitMarginNetincome/revenue$10,796,200/$10,804,000=0.99
ReturnonAssetsNetincome/totalassets$10,796,200/$2,675,250=4.04
Returnonstockholder'sequityNetincome/shareholderequity

$10,796,200/$746,290=14.47

Solvency Ratios
1. Debt to total assets
Divide total debt (both current and long-term liabilities) by total assets
= $746,290 / $2,675,250
=.02789
=27.89%
2. Times interest earned
Divide income before interest expense and income taxes by interest expense
=$732,718 / $63,768
=11.49 times
Horizontal and Vertical Analysis
Kudler Fine Foods
Balance Sheet
December 31, 2003
Assets

Current Assets:

Cash
Accounts Receivable
Less: Reserve for Bad Debts

$86,000
$0

$1,430,000
$86,000

53.45%
3.21%
3.21%

Ratio Analysis: Kudler Fine Foods

3
16.04%
.97%
0%

Merchandise Inventory
Prepaid Expenses
Notes Receivable

Total Current Assets

$429,000
$26,000
$0

$1,971,000 73.67%

Fixed Assets:

Vehicles
Less: Accumulated Depreciation

$63,000
$27,750

2.35%
$35,250
1.32%

Furniture and Fixtures

Less: Accumulated Depreciation

$435,000
$186,000
$249,000

Equipment
Less: Accumulated Depreciation

16.26%

$634,000
$214,000

9.31%

$420,000

23.70%
15.70%

Total Fixed Assets

$704,250 26.33%

Other Assets:

Goodwill
Total Other Assets

TOTAL ASSETS

$0

0%
$0

0%

$2,675,250

100%

Ratio Analysis: Kudler Fine Foods

Liabilities and Capital

Current Liabilities:

Accounts Payable
Sales Tax Payable
Payroll Taxes Payable
Accrued Wages Payable
Unearned Revenues
Short-Term Notes Payable
Short-Term Bank Loan Payable

$96,500
$3,950
$15,840
$0
$0
$0
$0

3.61%
.15%
.59%
0%
0%
0%
0%

Total Current Liabilities

$116,290

4.35%

Long-Term Liabilities:
Long-Term Notes Payable

$630,000

Total Long-Term Liabilities

23.55%
$630,000 23.55%

TOTAL LIABILITIES

$746,290

27.9%

Capital:
Owner's Equity
Net Profit

$746,290
$1,182,670

27.9%
44.21%

TOTAL CAPITAL

$1,928,960 72.10%

Ratio Analysis: Kudler Fine Foods

TOTAL LIABILITIES AND CAPITAL

$2,675,250

100%

Kudler Fine Foods

Income Statement
For the Year Ended December 31, 2003
Revenue:

Gross Sales
Less: Sales Returns and
Allowances

Net Sales

$10,804,000
$7,800

$10,796,200

100%

Cost of Goods Sold:

Beginning Inventory
Add:
Purchases
Freight-in
Direct Labor
Indirect Expenses

$467,890

4.33%

$3,752,891
$165,010
$3,769,591
$748,539

34.76%
1.53%
34.92%
6.93%

$8,903,921

Less: Ending Inventory

Cost of Goods Sold

Gross Profit (Loss)

$429,090

82.47%
3.97%

$8,474,831

78.5%

$2,321,369

21.5%

Ratio Analysis: Kudler Fine Foods

Expenses:

Advertising
Amortization
Bad Debts
Bank Charges
Charitable Contributions
Bonuses
Systems & Network

Contract
Credit Card Fees
HR Payroll Outsource
Depreciation
Dues and Subscriptions
Insurance
Custodial Contract
Interest
Maintenance Contract
Miscellaneous
Office Expenses
Operating Supplies
Software Licenses
Permits and Licenses
Postage
Professional Fees
Office Lease
Repairs
Telephone
Travel
Utilities
Vehicle Expenses
Wages

2.44%
.03%
.02%
.18%
.05%
.6%
.76%

$263,000
$2,700
$2,300
$19,258
$5,000
$65,000
$82,000

$125
$8,500
$27,750
$29,403
$65,000
$48,000
$63,768
$36,000
$1,100
$8,300
$5,500
$8,200
$3,500
$46,000
$32,157
$63,000
$850
$16,500
$4,500
$7,900
$11,458
$725,650

0%
.08%
.16%
.27%
.6%
.44%
.59%
.33%
.01%
.08%
.05%
.08%
.03%
.43%
.3%
.58%
.01%
.15%
.04%
.07%
.11%
6.72%

Total Expenses

$1,652,419

.15%

Net Operating Income

$668,950

6.2%

Ratio Analysis: Kudler Fine Foods

Other Income:

Gain (Loss) on Sale of Assets

Interest Income

Total Other Income

$0
$7,845

.07%

$7,845

.07%

$676,795

6.27%

Net Income (Loss)

Ratio Analysis Memo

Memorandum

Ratio Analysis: Kudler Fine Foods

To:

Kathy Kudler, CEO

CC:

Upper Management

From:

Accounting Department

Date:

1/14/15

Re:

Ratio Calculations and horizontal and Vertical Analysis

Dear Mrs. Kudler

CONFIDENTIAL
After reviewing the ratio calculations and horizontal and vertical analysis, we have a better understanding of
where we are as a company. The liquidity ratio reveals that we are in the positives and our current assets are
greater than current liabilities. The profitability ratio reveals some positives and negatives. Our asset turnover is
in the positives but when looking at our profit margin, we can see that our profit margin is in the negatives. This
is something we will need to work on so that we are out of the negatives. The solvency ratio shows us that our
debt to total assets is in the positive which means that we more assets than we do debt. This is more good news
for the company.
The liquidity ratio would best be used by the CFO in order to see if the companys assets out-weigh current
liabilities. In our case, the CFO would feel ok with the numbers we have come up with. The profitability ratio
would be best used by the sales department. This information would let the head of sales know that they are
losing money because of their profit margin. This means each sale, they potentially lose money. This needs to be
fixed by increasing prices or cutting the cost of the product in order to bring the profit margin into the positives.
The solvency ratio would be used best by the CFO. This information lets the CFO know if their total debt is
greater than their total assets. In our case we are fine because we are in the positives.
After reviewing all the information I think that overall, the company is in a very good position. Almost all of
our numbers are in the positives except our profit margin. This is something that needs to be discussed and see
what we can do in order to turn this number around. Once we can figure out how to increase or profit margin, we
will be in the positives across the board.
If you have any questions regarding these analyses, please get in touch with me.
Thank you
Accounting Department