Reed's Case Study Tips :

1. Summarize the case
2. Formulate answers to questions 1-8. For question 1, calculate ratios in Exhibit 4 of the case.

Number your answers or use the question as the title for your answer in paragraph form so that I can tell which question from the case study you are answering.
Please use the ratios in the book, not the formulas they show in the case study or you won't get the right answers.  I think someone made a mistake when they typed in the calculation for the ratio for Asset Turnover in the case study.  Asset turnover is always Sales over Total Assets.  Whomever put all of the calculations was probably looking at Inventory Turnover, which uses the cost of goods sold (cost of sales) over inventory in the calculation.  The case study gives you all of the industry ratios, so that is a hint that you should probably compute those same ratios for Reed's to see how he compares to the industry.  You should calculate:
Liquidity Ratios = Current, Quick, Receivable Turnover, Average Collection Period (collections in days)
Efficiency Ratios = Total Asset Turnover, Inventory Turnover, Payables Turnover (all shown in number of times turned)
Profitability Ratios = Both gross and net profit margin, return on common equity (Return on equity).

Pro forma statement for Question Number four (4) should look something like this, but with the new forecasted numbers for 1995 using the industry percentages for each line item times the sales projection for 1995 (% of sales method):
Net Sales
Cost of Goods Sold
Gross Profit
Selling General and Administrative Expenses
Depreciation & Amort.
Interest Expense
Income Before Taxes
Provision for income taxes (hint: you need to calculate the tax rate for 1994 and use that for Reed's)
Net Income

Price: $15.33

Solution: The downloadable solution consists of 6 pages, 933 words.
Deliverable: Word Document