Activity $10$

TEST YOUR UNDERSTANDING

A Review of Ratlo Analysis

ORACLE CORPORATION

$($P$/$L$/$S$)$

Enr the fiscal year ended

$\frac{5}{31}\frac{?}{99}$

Current ratio

$1\mathrm{.}79$

$\frac{5}{31}\frac{?}{98}$

$\frac{\frac{5}{31}\frac{?}{97}}{1\mathrm{.}70}$

$($P$/$L$/$S$)$

Debt ratio

$0\mathrm{.}491$

$0\mathrm{.}492$

$0\mathrm{.}488$

$($P$/$L$/$S$)$

Return on sales

$0\mathrm{.}15$

$0\mathrm{.}11$

$0\mathrm{.}14$

$($P$/$L$/$S$)$

Return on assets

$0\mathrm{.}18$

$0\mathrm{.}14$

$0\mathrm{.}18$

Source: Disclosure, ina, Compact D$/$SEC$,2000.$

In the left$-$hand margin above, circle whether the ratio measures $($P$)$ rofitability, short$-$term $($I$)$ iquidity the ability to pay current debt, or long$-$term $($S$)$olvency $-$ the ability to pay long$-$term debt.

For each short$-$term liquidity ratio above, circle the ratio indicating the greatest ability to pay current liabilities for the three years of information preseuted.

This company appears to $($have $/$ not have$)$ the ability to pay current debt.

For each long$-$term solvency ratio above, circle the ratio indicating the least amount of debt financing for the three years of information presented.

This company relies more heavily on $($debt $/$ equity$)$ to finance assets.

For each profitability ratio above, circle the ratio indicating the greatest profitability over the three years of information presented.

The profitability of this company appears to be $($strong $/$ weak$).$

Refer to all of the ratio information presented above. This company appears to be $($strong $/$ weak$).$

Explain your answer.

The ratio that measures the proportion of total assets financed with liabilities is

$($Return on sales $/$ Return on assets $/$ Current ratio $/$ Debt ratio$).$

The ratio that measures the proportion of net sales resulting in profits is

$($Retarn on sales $/$ Return on assets $/$ Current ratio $/$ Debt ratio$).$

The ratio that measures how effectively assets are used to geaerate profits is

$($Retura on sales $/$ Return on assets $/$ Current ratio $/$ Debt ratio$).$

A supplier extending credit to a company for $60$ days would be most interested in examining the

$($Return on sales $/$ Return on assets $/$ Current ratio $/$ Debt ratio$).$