The Jimenez Corporations Forecasted 2017 Financial Statement

The Jimenez Corporations Forecasted 2017 Financial Statements Follow

The Jimenez Corporation’s forecasted 2017 financial statements follow, along with some industry average ratios. Calculate Jimenez’s 2017 forecasted ratios, compare them with the industry average data, and comment briefly on Jimenez’s projected strengths and weaknesses.

Paper For Above instruction

Introduction

The financial health and performance of a corporation are crucial indicators of its market potential, operational efficiency, and overall stability. Financial ratios serve as vital tools that allow analysts, investors, and managers to evaluate these aspects comparatively and comprehensively. This paper aims to calculate the forecasted financial ratios for Jimenez Corporation for 2017, juxtapose these with the industry averages, and analyze the company's projected strengths and weaknesses based on this comparison.

Calculation of Jimenez’s 2017 Ratios

To evaluate Jimenez’s financial position, key ratios such as liquidity ratios, leverage ratios, efficiency ratios, and profitability ratios are calculated using the forecasted financial statements.

Liquidity Ratios

Current Ratio: This measures the firm's ability to meet short-term obligations.

Current Assets / Current Liabilities = $1,405,000 / $602,000 ≈ 2.34

Quick Ratio: Indicates the firm’s ability to meet short-term liabilities with its most liquid assets.

Cash + Accounts receivable / Current Liabilities = ($72,000 + $439,000) / $602,000 ≈ 0.89

Leverage Ratios

Debt-to-Assets Ratio: Total liabilities / Total Assets = ($602,000 + $404,290) / $1,836,000 ≈ 0.55 or 55%.

Note: The industry average debt-to-assets ratio is 21%, which indicates Jimenez has a higher leverage compared to the industry.

Efficiency Ratios

Inventory Turnover: Cost of Goods Sold / Average Inventory = $3,580,000 / $894,000 ≈ 4.00

Note: The industry ratio is 7.0, which means Jimenez’s inventory turnover is lower, indicating potential overstocking or slow-moving inventory.

Days Sales Outstanding (DSO): (Accounts receivable / Sales) x 365 = ($439,000 / $4,290,000) x 365 ≈ 37.45 days

Industry average DSO is 32 days, indicating Jimenez collects receivables slightly slower than the industry average.

Fixed Assets Turnover: Sales / Fixed Assets = $4,290,000 / $431,000 ≈ 9.94

Industry ratio is 13.0, suggesting Jimenez may not be utilizing its fixed assets as efficiently as industry peers.

Total Assets Turnover: Sales / Total Assets = $4,290,000 / $1,836,000 ≈ 2.34

Industry ratio is 2.6, hence Jimenez is slightly less efficient in using its assets to generate sales.

Profitability Ratios

Profit Margin: Net Income / Sales = $108,408 / $4,290,000 ≈ 2.53%

The industry profit margin is 3.5%; Jimenez’s margins are somewhat below industry average, indicating potential cost control issues or pricing strategies needing review.

Return on Assets (ROA): Net Income / Total Assets = $108,408 / $1,836,000 ≈ 5.91%

Industry ROA is 9.1%; thus, Jimenez’s efficiency in generating profit from its assets appears lower.

Return on Equity (ROE): Net Income / Shareholders’ Equity = $108,408 / ($575,000 + $254,710) ≈ 15.57%

Compared to the industry average of 18.2%, Jimenez’s ROE is slightly below, indicating room for improving shareholders’ value.

Market Ratios

P/E Ratio: Current Market Price / EPS = $23.57 / $4.71 ≈ 5.0

The industry P/E ratio is 6.0; Jimenez’s lower P/E suggests the market perceives slightly higher risk or lower growth prospects.

Comparison with Industry Averages and Analysis

Overall, Jimenez’s liquidity position, as indicated by its current ratio (~2.34), aligns reasonably with industry expectations (current ratio of 2.7). However, its quick ratio (~0.89) suggests liquidity constraints, as the company’s liquid assets are insufficient to cover immediate liabilities, contrasting with industry norms.

Leverage ratios reveal a notably higher debt level at Jimenez—over half the assets are financed through debt—compared to the industry average (21%). This high leverage might amplify financial risk, though it can also support growth if managed properly. Efficiency ratios such as inventory turnover and fixed assets turnover are below industry standards, suggesting potential operational inefficiencies or excess inventory levels.

Profitability ratios are also somewhat weaker than industry averages, with margins at 2.5% versus 3.5%, and ROA below 9.1%. This indicates that Jimenez, while profitable, is less efficient at converting sales into profit and utilizing its assets compared to its peers. The lower P/E ratio suggests subdued market confidence in its future earnings growth.

Projected Strengths and Weaknesses

Discussing Jimenez’s projected strengths, its healthy current ratio indicates good short-term liquidity. Its sales volume suggests a sizable operation capable of generating revenue in line with industry standards. The company’s relatively stable ROE shows its ability to generate satisfactory returns for shareholders, although slightly below industry levels.

On the other hand, weaknesses include high leverage, which exposes Jimenez to greater financial risk, especially if interest rates rise or cash flows decline. Operational inefficiencies are evident from lower inventory turnover and fixed assets turnover ratios, indicating potential overstocking or underutilization of assets. Profit margins and ROA also lag behind industry averages, suggesting the need for cost management and operational improvements.

Conclusion

In conclusion, Jimenez Corporation exhibits a mix of strengths and weaknesses projected for 2017. Its liquidity position provides a foundation for short-term operational stability, but high debt levels and lower efficiency ratios pose risks and areas for improvement. Strategically, focusing on reducing debt, optimizing inventory management, and enhancing asset utilization could strengthen its competitive position and shareholder value. Continuous performance monitoring and strategic adjustments will be vital to capitalize on strengths and mitigate weaknesses moving forward.

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