Please give a detailed analysis of the financial statements given below for Joshua & White Technologies. Your analysis should include answers to the questions as follows (not limited to these questions):
• Has the company’s liquidity position improved or worsened? How’s it compared with the industry average?
• Has the company’s ability to manage its assets improved or worsened? How’s it compared with the industry average?
• How has the company’s profitability changed during the last year? How’s it compared with the industry average?
Note: you may need to research on the industry average on financial ratios for Information Technology companies.
Joshua & White Technologies: December 31 Balance Sheets
(Thousands of Dollars)
Assets 2019 2018
Cash and cash equivalents $21,000 $20,000
Short-term investments 3,759 3,240
Accounts Receivable 52,500 48,000
Inventories 84,000 56,000
Total current assets $161,259 $127,240
Net fixed assets 223,097 200,000
Total assets $384,356 $327,240
Liabilities and equity
Accounts payable $33,600 $32,000
Accruals 12,600 12,000
Notes payable 19,929 6,480
Total current liabilities $66,129 $50,480
Long-term debt 67,662 58,320
Total liabilities $133,791 $108,800
Common stock 178,440 178,440
Retained Earnings 72,125 40,000
Total common equity $250,565 $218,440
Total liabilities and equity $384,356 $327,240
Joshua & White Technologies December 31 Income Statements
(Thousands of Dollars)
20192018
Sales $420,000 $400,000
COGS except excluding depr. and amort. 300,000 298,000
Depreciation and Amortization 19,660 18,000
Other operating expenses 27,600 22,000
EBIT $72,740 $62,000
Interest Expense 5,740 4,460
EBT $67,000 $57,540
Taxes (25%) 16,750 14,385
Net Income $50,250 $43,155
Common dividends $18,125 $17,262
Addition to retained earnings $32,125 $25,893
Other Data 2019 2018
Year-end Stock Price $90.00 $96.00
# of shares (Thousands) 4,052 4,000
Lease payment (Thousands of Dollars) $20,000 $20,000
Sinking fund payment (Thousands of Dollars) $5,000 $5,000
Sample Answer
Sample Answer
Analysis of Joshua & White Technologies Financial Statements
Liquidity Position
To assess the liquidity position of Joshua & White Technologies, we will focus on the current assets and liabilities. Comparing the figures from 2019 to 2018, we can see that the company’s liquidity position has improved. The total current assets have increased from $127,240 in 2018 to $161,259 in 2019. This increase is mainly driven by an increase in inventories and accounts receivable.
However, to fully evaluate the company’s liquidity position, we need to compare it with the industry average. Unfortunately, the given financial statements do not provide information on the industry average for comparison. To accurately assess Joshua & White Technologies’ liquidity position, it would be necessary to research industry benchmarks for liquidity ratios such as the current ratio and quick ratio.
Ability to Manage Assets
To evaluate the company’s ability to manage its assets, we can analyze the net fixed assets and compare them with the current assets. From 2018 to 2019, Joshua & White Technologies has experienced an increase in net fixed assets, which have risen from $200,000 to $223,097. This indicates that the company has invested in acquiring or upgrading long-term assets.
The ability to manage assets effectively can be assessed by comparing the net fixed assets with the total assets. In 2018, the net fixed assets accounted for approximately 61% of the total assets, while in 2019, this percentage increased to approximately 58%. This suggests that the company’s ability to manage its assets has worsened slightly as a proportion of total assets.
Again, to have a more comprehensive understanding of Joshua & White Technologies’ ability to manage assets compared to the industry average, it would be necessary to research industry benchmarks for asset management ratios such as asset turnover and fixed asset turnover.
Profitability
Analyzing the profitability of Joshua & White Technologies can be done by examining the income statement figures. From 2018 to 2019, the company’s sales increased from $400,000 to $420,000, indicating revenue growth. However, cost of goods sold (COGS), other operating expenses, and depreciation and amortization also increased during this period.
The company’s earnings before interest and taxes (EBIT) increased from $62,000 in 2018 to $72,740 in 2019. This shows an improvement in profitability. However, it is important to note that interest expense also increased during this period.
To evaluate the company’s profitability in comparison to the industry average, we would need industry benchmarks for profitability ratios such as gross profit margin, operating profit margin, and net profit margin.
Overall, based on the available information, Joshua & White Technologies has shown improvements in its liquidity position and profitability. However, further analysis is required using industry benchmarks to gain a more accurate comparison with the industry average.
