Abington Hill Toys

ABINGTON-HILL TOYS, INC. 1. INTRODUCTION Abington- agglomerate Toys new president, Vernon Albright, hires a new company comptroller, David Hartly. Hartlys first task was to complete an compend of the firms condition and generate financial planning for the company. 2. methodology A. Current balance B. Acid-test proportion C. Inventory Turnover Ratio D. Debt-Equity ratio E. Gross Margin F. Net Profit Margin G. Z pee-pee 3. SOLUTION A. 280,000/290,000=. 97 B. 130,000/290,000=. 45 C. 900,000/150,000=6 D. 490,000/710,000=. 69 E. 300,000/1,200,000=. 25 F. 60,480/1,200,000=. 05 G. 1. (-10,000/1,200,000)+1. 4(60,480/1,200,000)+3. 3(126,000/1,200,000)+ 1. 05(1,200,000/1,200,000)=1. 46 4. CONCLUSION The current ratio of . 97 federal agency for every $. 97 of current assets, Abington Hill Toys has $1 of current liabilities. Since the current ratio is little than the standard of 3. 5, Abington Hill Toys implies a high risk and a presumptive incapability to generate sufficient working capi tal to meet its short needs. The acid-test ratio of . 45 is less than half of its current ratio which means Abington Hill Toys instrument comprises of more than half of its current assets.The inventory perturbation ratio of 6 is higher than 5 which is the standard for companies in this industry. Since this ratio is higher than average, Abington Hill Toys is showing strong sales. The higher than standard inventory ratio could also mean ineffective buying of inventory. The debt-equity ratio of . 69 means Abington Hill Toys has $. 69 of debt to every dollar of equity. This would put them in at a modester risk to enhance financial leverage. The crude margin is at 25%. This means Abington Hill Toys is scarce profiting 25% above their direct costs. This is equivalent to the standard of other companies in this industry.The realise profit margin of 5% is less than the standard of 8%. Abington Hill Toys net profit margin means equity holders will only receive 5% from every dollar afte r all expenses, interest, and taxes atomic number 18 paid. The low Z score of 1. 46 would sway me to not conduce the money. By Altmans scale, Abington Hill Toys has a 95% chance of freeing into bankruptcy in 12 months. Along with the high probability of waiver into bankruptcy within 12 months, the net profit margin of 5% doesnt seem worthwhile. I would rather invest in something safer for that low of a return.