Selection of Ratios The controller of Oldtime Enterprises is concerned that the company has operated for too
Question:
Selection of Ratios The controller of Oldtime Enterprises is concerned that the company has operated for too long using old production equipment and techniques and needs to modernize. Unfortunately, the company has no money on hand to purchase new machinery and equipment and would be forced to issue long-term debt to acquire the money needed for modernization. The controller is interested in analyzing Oldtime’s financial position and operating activities and comparing its ratios with those of its most immediate competitors. Explain how each of the following ratios could provide information valuable in assessing Oldtime’s financial position and operating results.
a. Long-term debt to total assets.
b. Debt to equity.
c. Gross margin percentage.
d. Operating cycle.
e. Times interest earned.
f. Return on assets.
Step by Step Answer:
Financial Accounting A Decision Making Approach
ISBN: 9780471328230
2nd Edition
Authors: Thomas E. King, Valdean C. Lembke, John H. Smith