Chapter 3, Problem 3.24P

Learning Goal 6

P3-24 Financial statement analysis The financial statements of Zach Industries for the year ended December 31, 2019, follow.

Zach Industries Income Statement for the Year Ended December 31 2019

Sales revenue	$160,000
Less: Cost of goods sold	106,000
Gross profits	$ 54,000
Less: Operating expenses
Selling expense	$ 16,000
General and administrative expenses	10,000
Lease expense	1,000
Depreciation expense	10,000
Total operating expense	$37,000
Operating profits	$ 17,000
Less: Interest expense	6,100
Net profits before taxes	$10,900
Less: Taxes	4,360
Net profits after taxes	$ 6,540

Zach Industries Balance Sheet December 31, 2019

Assets
Cash	$ 500
Marketable securities	1,000
Accounts receivable	25,000
Inventories	45,500
Total current assets	$72,000
Land	$ 26,000
Buildings and equipment	90,000
Less: Accumulated depreciation	38,000
Net fixed assets	$78,000
Total assets	$150,000
Liabilities and Stockholders’ Equity
Accounts payable	$ 22,000
Notes payable	47,000
Total current liabilities	$ 69,000
Long-term debt	22,950
Common stock	31,500
Retained earnings	26,550
Total liabilities and stockholders’ equity	$150,000
The firm’s 3,000 outstanding shares of common stock closed 2019 at a price of $25 per share.

1. a. Use the preceding financial statements to complete the following table. Assume that the industry averages given in the table are applicable for both 2018 and 2019.

1. b. Analyze Zach Industries’ financial condition as it is related to (1) liquidity, (2) activity, (3) debt, (4) profitability, and (5) market. Summarize the company's overall financial condition.