Comprehensive Financial Ratio Analysis for Tasty Corp. (2017-2019)

This homework assignment presents a comprehensive financial analysis of Tasty Corp. from 2017 to 2019. It includes the calculation of key financial ratios such as Earnings Per Share (EPS), payout ratio, price-to-earnings (P/E) ratio, dividend yield, profit margin, gross profit margin, Return on Assets (ROA), Return on Equity (ROE), inventory turnover, accounts payable turnover, capital asset turnover, total asset turnover, current ratio, quick ratio, debt to total assets, and times interest earned. The assignment utilizes the provided income statements and balance sheets to perform these calculations and interpret the company's financial performance, including its profitability, efficiency, and solvency. The solution provides all the calculations for each financial ratio.

INTERNATIONAL FINANCE

Tasty Corp.
Income Statement
Year ended December 31
2019 2018 2017
Sales
$
12,52,000
$
14,75,000
$
15,60,00
0
Less: Cost of goods sold 6,85,000 7,25,000 7,45,000
Gross margin
$
5,67,000
$
7,50,000
$
8,15,000
Operating expenses
Salaries, wages & benefits
$
1,46,000
$
1,42,000
$
1,35,000
Utilities 28,400 26,500 25,000
Depreciation/amortization 24,000 35,000 35,000
Insurance 17,500 15,500 15,000
Leasing 34,000 28,000 28,000
Other 8,500 2,500 6,500

Total operating expenses
$
2,58,400
$
2,49,500
$
2,44,500
Earning before interest and taxes
$
3,08,600
$
5,00,500
$
5,70,500
Interest expense 36,000 48,000 54,000
Earnings before tax
$
2,72,600
$
4,52,500
$
5,16,500
Income tax (20%) 54,520 90,500 1,03,300
Net income
$
2,18,080
$
3,62,000
$
4,13,200
Additional information:
Contribution margin 51.00% 49.00% 52.00%
Tasty Corp,
Balance Sheet
at December 31
2019 2018 2017
Assets
Current assets
Cash
$
1,85,000
$
1,48,000
$
1,56,000
Account receivable

37,500 46,500 48,000
Prepaid expenses 12,400 22,300 18,500
Inventories 39,000 44,000 45,000
Total Current Assets
$
2,73,900
$
2,60,800
$
2,67,500
Non-current assets
Land
$
6,00,000
$
6,00,000
$
6,00,000
Building 11,00,000 11,00,000
11,00,00
0
Accumulated depreciation, building
(2,85,000
)
(2,65,000
)
(2,50,00
0)
Equipment 2,59,000 3,48,000 3,48,000
Accumulated depreciation, equipment (89,500)
(1,36,000
)
(1,25,00
0)
Total Non-current assets
$
15,84,500
$
16,47,000
$
16,73,00
0
Total Assets $ $ $

18,58,400 19,07,800
19,40,50
0
Current liabilities
Liabilities & Equity
Current Liabilities
Line of credit
$
29,500
$
28,000
$
25,000
Account payable 51,200 46,800 43,000
Wages payable 9,500 4,500 6,500
Current portion of mortgage payable 36,000 36,000 36,000
Total Current Liabilities
$
1,26,200
$
1,15,300
$
1,10,500
Non-Current Liabilities
Mortgage payable
$
3,67,000
$
4,00,000
$
4,36,000
8% Bonds payable, due 2021 4,00,000 5,00,000 5,00,000
Total Non-Current Liabilities
$
7,67,000
$
9,00,000
$
9,36,000
Total Liabilities $
8,93,200
$
10,15,300
$
10,46,50

0
Equity
Common shares, 200,000 shares issued
$
6,00,000
$
6,00,000
$
6,00,000
Preferred shares, 15,000 shares issued 65,000 65,000 65,000
Retained earnings 3,00,200 2,27,500 2,29,000
Total Equity
$
9,65,200
$
8,92,500
$
8,94,000
Total Liabilities & Equity
$
18,58,400
$
19,07,800
$
19,40,50
0
Additional information for 2019:
- bonds were redeemed
* as per the financial statements, bonds in 2018 has
reduced by 100000 in 2019
- no new debt was issued
*no issue no impact on ratio on debt to assets ratio
- equipment originally costing $89,000 was sold for its book value of $49,000
*As equipment is valued and sold at $49000. Hence, there is no profit no loss.
However, it will not affect cash and net profits.
- dividends of $100,000 were declared & paid in 2019
*This has been used to calculate pay-out ratio

Questions, show your calculations (Round all answers to two decimal places unless
otherwise stated).
Calculate EPS for 2019. 1.09
Calculate the pay-out ratio for 2019. 46%
Calculate the P/E ratio for 2019. 10.09
DPS (Dividend per share) 0.50
Calculate the dividend yield for 2019. 4.55
2019 2018 2017
Calculate the profit margin for each year. 17.42% 24.54% 26.49%
Calculate the gross profit margin for each year. 45.29% 50.85% 52.24%
Calculate the ROA for each year. 11.73% 18.97% 21.29%
Calculate the ROE for each year. 22.59% 40.56% 46.22%
2019
Calculate the inventory turnover (COGS) 4.13

Calculate the accounts payable turnover 6.39
Calculate the capital asset turnover 0.19
Calculate the total asset turnover 0.17
Calculate the current ratio 2.17
Calculate the quick ratio 1.86
Calculate debt to total assets 0.41
Calculate times interest earned 8.57

References
Accountingverse, (2019). Financial Ratio Analysis. Retrieved from:
https://www.accountingverse.com/managerial-accounting/fs-analysis/financial-
ratios.html
Arkan, T. (2016). The importance of financial ratios in predicting stock price trends: A case
study in emerging markets. Finanse, Rynki Finansowe, Ubezpieczenia, 79(1), 13-26.
CFI, (2019). Dividend Payout Ratio. Retrieved from:
https://corporatefinanceinstitute.com/resources/knowledge/finance/dividend-payout-
ratio-formula/
Myšková, R., & Hájek, P. (2017). Comprehensive assessment of firm financial performance
using financial ratios and linguistic analysis of annual reports. Journal of
International Studies, volume 10, issue: 4.