Using the following data for Jackson Products Company, answer Parts a through g:

Using the following data for Jackson Products Company, answer Parts a through g:

Jackson Products Company’s Balance Sheet December 31, 2013

Cash $ 240,000

Accounts payable $ 380,000

Accounts receivable 320,000

Notes payable (9%) 420,000

Inventory 1,040,000

Other current liabilities 50,000

Total current assets $1,600,000

Total current liabilities $ 850,000

Net plant and equipment 800,000

Long-term debt (10%) 800,000

Total assets $2,400,000

Stockholders’ equity 750,000

Total liabilities and stockholders’ equity $2,400,000

Income Statement for the Year Ended December 31, 2013

Net sales (all on credit) $3,000,000

Cost of sales 1,800,000

Gross profit $1,200,000

Selling, general, and administrative expenses 860,000

Earnings before interest and taxes $340,000

Interest: Notes $37,800 Long-term debt 80,000 Total interest charges 117,800

Earnings before taxes $222,200

Federal income tax (40%) 88,880

Earnings after taxes $133,320

Industry Averages Current ratio 2.5:1

Quick ratio 1.1:1

Average collection period (365-day year) 35 days Inventory turnover ratio 2.4 times

Total asset turnover ratio 1.4 times Times

interest earned ratio 3.5 times

Net profit margin ratio 4.0%

Return on investment ratio 5.6%

Total assets/stockholders’ equity (equity multiplier) ratio 3.0 times

Return on stockholders’ equity ratio 16.8%

P/E ratio 9.0 times

a. 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?