CASE 1- ABINGTON-HILL TOYS, INC.
PART I – INTRODUCTION Abington Hill Toys, Inc, a seasonal business that dependent on holiday season, which is a high-risk company that would easily results in costly for company to restore inventories in the non-holiday seasons. In this case, because of no successor due to the death of Lewis Hill, the last founder of the company, and the slowly deteriorated financial condition as Mr. Hill was running the company’s final years, the stockholders decided to recruited and hired Vernon Albright to lead the company. The new president began to seek an assistant comptroller when he took the leadership role because the prior comptroller was incompetence and poor of management that resulted in the poor
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Inventory turnover: 900,000/120,000=6 E. Fixed asset turnover: 1,200,000/920,000=1.304 F. Total asset turnover: 1,200,000/1,200,000=1 G. Debt Ratio: 490,000/ 1,200,000=40.83% H. Times interest earned: 126,000/ 39,600=3.1818 I. Gross profit margin: 300,000/ 1,200,000=25% J. Net profit margin: 60,480/ 1,200,000=5.04% K. Return on total assets: 126,000/ 1,200,000=10.5% L. Return on net worth: 60,480/ 710,000=8.52% PART IV – CONCLUSION According to the analysis, I assume that the Abington-Hills Toys, Inc. company is at high risk because: A. The Current ratio is 0.9665, which is less than 1, means that the company has difficulty paying its bills on time. B. The Acid-test Ratio is 0.4482 means that the company is unable to pay its current liabilities and should be looked at with extreme caution. C. Average Collection Period is 60 days means on average it takes up to 60 days to collect money from customers from the time they make purchase. D. Inventory turnover ratio is 6.0 means the inventory turned six times that year, or there is a two month supply of inventory on hand. E. Fixed asset turnover ratio is 1.304, which is less than the standard one, means either sales are dropping or the equipment purchases are raising quickly. F. Total asset turnover ratio is 1 means the company’s net sales did not change. G. Debt Ratio is 40.83% that less than 50% means the most assets