SALES GROWTH
During the four-year period ended December 31, 2008, SciTronics’ sales grew at a 20.69 % ($244,000/$115,000) = (1+r) ^4 compound rate. There were no acquisition or divestitures. PROFITABILITY RATIO: How Profitable is the Company?
1. SciTronics’ profit as a percentage of sales in 2008 was 5.73% (14000/244000)
2. This represented an increase from 3.4% (5000/147000) in 2005.
3. SciTronics had a total of $112, 000 (75,000+20,000+7,000+10,000) of capital at year-end 2008 and earned before interest but after taxes (EBIAT) $16,000 (26,000-10,000) in 2008. Its return on capital was 14.29% (16,000/112,000) which represents an increase from the 8.11% (6,000/74,000) earned in 2005. 4. SciTronics had $75,000 of owner’s equity and earned $14,000 after taxes in 2008. Its return on equity was 18.66% ($75,000/$14,000), which represents an improvement from the 8.19% ($5,000/$61,000) earned in 2005.
ACTIVITY RATIO: How Well Does the Company Employs Its Assets?
1. Total Assets turnover for SciTronics in 2008 can be calculated by dividing $244,000 (net sales) into $159,000 (total assets).
The turnover deteriorated from 1.58 times in 2005 to 1.53 in 2008.
2. SciTronics had $66,000 in accounts receivables at year end 2008. Its average sales per day were $668.49 ($244,000/365) during 2008 and its average collection period was 98.73 days. ($66,000/668.49).
This represents an improvement from the average collection period of104.29 ($42,000/402.73) days in 2005.
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3. SciTronics apparently needed $29,000 of inventory at year-end 2008 to support its operations during 2008. Its activity during 2008 as measured by the cost of goods sold was $74,000. (COGS).
It therefore had an inventory of turnover of 2.55 (74,000/29,000) times. This represents an improvement from 2.04 (43,000/21,000) times in 2005.
4. SciTronics had net fix assets of $18,000 (net fix assets) and sales of $244,000 in 2008. Its fixed asset turnover ratio in 2008 was 13.56 (244,000/18,000), a deterioration from 16.33 (147,000/9,000) in 2005.
LEVERAGE RATIOS: How Soundly Is the Company Financed?
1. SciTronics’ ratio of total assets divided by owners’ equity increased from 1.52 (93,000/61,000) at year end 2005 to 2.12 (159,000/75,000) at year-end 2008.
2. At year-end 2008, SciTronics’ total liabilities were of its total assets was 52.83% (48,000+7000+20000+9000/159000), which compares with 34.4% (21,000+11,000)/93,000).
3. The market value of SciTronics equity was $175,000,000 at December 31, 2008. The total debt ratio at market was 32.4% (84,000/84,000+175,000).
4. SciTronic’s earnings before interest and taxes (operating income) were $26,000 in 2008 and its interest charge were $2,000. Its times interest earned were 13 times. This represents an improvement from the 2005 level of 10 times.
5. SciTronics owed its supplies $6,000 at year end 2008. This represents 8.1%(6,000/74,000) of cost of goods sold and was a decrease from 11.63% (5,000/43,000) at year end 2005. The company appears to be more prompt in paying its suppliers in 2008 than it was in 2005.
6. The financial riskiness of SciTronics decreased between 2005 and 2008.
LIQUIDITY RATIOS: How Liquid Is the Company?
1. SciTronics held $133,000 of current assets at year-end 2008 and owed $48,000 to creditors due to be paid within one year. Its current ratio was 2.77 ( 133000/48000 ), a decrease from the ratio of 3.90 (82000/21000) at year-end 2005.
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2. The quick ratio for SciTronics at year end 2008 was 2.16 (133,000-29,000)/48,000), a decrease from the ratio of 2.90 (82,000-21,000/21,000) at year-end 2005.
