CALCOR COMPANY

Calcor Company



Calcor Company

Company Background

Calcor Company has been a wholesale distributor of automobile parts for domestic automakers for about twenty years. Calcor Company has suffered in the course of the recent slump in the domestic auto industry and the performance of Calcor Company has not returned to normal to the levels of the industry.

CALCOR COMPANY

Income Statement

For the Year Ended November 30, 2009 (thousands omitted)

Net sales

$9,240.0

Expenses:

Cost of goods sold $ 6,552.00 Selling expense $ 780.00 Advertising expense

$ 420.00 Administrative expense $ 900.00 Interest expense $ 170.00 Total $ 8,822.00

Income before income taxes $ 418.00

Income taxes $ 167.20

Net income $ 250.80

Financial Ratios for the Calcor Company for the fiscal year of 2008 - 2009

Return on sales before interest and taxes

Return on sales before interest and taxes

=

Net Income before income taxes

X

100

Net sales

Return on sales before interest and taxes

= $ 418.00

X

100

$ 9,240.0

Return on sales before interest and taxes

=

$ 0.045238095

X

100

Return on sales before interest and taxes

=

4.523809524 %

Turnover of average assets

Avg. assets (2008) =

560

Turnover of average assets

=

Net Sales

Average Assets (2009)

Turnover of average assets

=

$ 9240

$ 710

Turnover of average assets

=

13.01408451

Return on average assets before interest and taxes

Return on average assets before interest and taxes

=

Net Income

Average Assets

Return on average assets before interest and taxes

= $ 250.80

$ 710

Return on average assets before interest and taxes

= 0.35

Interpretation

It is difficult or in other words it is impossible for Calcor Company to attain the first two of Kuhn's goals without accomplishing the third goal that is return on average assets before interest and taxes which is 30 %. The reason of this statement is that if the return on sales before interest and taxes, and assets turnover is not met then Kuhn cannot achieve return on average assets before interest and taxes as it is important for the company to increase its sales which will lead towards the increase in the net income before interest and taxes. Earnings before interest and taxes denotes the profitability of the operations of a company to remove the net result of less spending two concepts, interest paid and taxes paid, which have little to do with the actual evolution of such operations. Interest rates fluctuate according to the macroeconomic cycle and taxes on the country of registration of the company's headquarters. Thus EBIT , acronym, often used as shorthand reference of operating results, ...