B) Calculate the projected profit margin, operating profit margin, basic earning power, return on assets, and return on equity, What can you say about these ration?

C) Calculate the projected inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. How does Computrons utilization of assets stack up against that of other firms in its industry?

D) Calculate the projected current and quick ratios based on the projected balance sheet and income statement data. What can you say about the companys liquidity position and its trend? The liquidity position is extremely awful since the current liabilities are exceptionally high very contrasted with current resources. The current liabilities are multiple occasions the present resources. The circumstance of liquidity improved in 2019 when contrasted with before years since the present resources further expanded and current liabilities further diminished. The liquidity proportion would be generally useful for the loan bosses since they can assess when the working capital is sufficient or not.

E) Calculate the projected debt ratio, debt-to-equity ratio, liabilities-to-assets ratio, times-interest-earned ratio, and EBITDA coverage ratios. How does Computron compare with the industry with respect to financial leverage? What can you conclude from these ratios?

F) Calculate the projected price/earnings ratio and market/book ratio. Do these ratios indicate that investors are expected to have a high or low opinion of the company?

G) Perform a common size analysis and percentage change analysis. What do these analyses tell you about Computron?

H) Use the extended DuPont equation to provide a breakdown of Computrons projected return on equity. How does the projection compare with the previous years and with the industrys DuPont equation?

I) What are some potential problems and limitations of financial ratio analysis?

J) What are some qualitative factors that analysts should consider when evaluating a companys likely future financial performance?

I CASE The first part of the case, presented in the previous chapter, discussed resented in the previous chapter, discussed the situation of Computron Industries after an expansion program. A large loss occurred rather than the expected profit. As a result, its managers, directors, and investors are concerned about the firm's survival. Jenny Cochran was brought in as assistant to Computron's chairman, who had the task of getting the company back into a sound financial position. Cochran must prepare an analysis of where the company is now, what it must do to regain its financial health, and what actions to take. Your assignment is to help her answer the following questions. Provide clear explanations, not yes or no answers. Use the recent and projected financial information shown next. Balance Sheets (Millions of Dollars) 2018 2019 2020E Assets $ $ $ 60 50 Cash and equivalents 60 100 10 Short-term investments 520 400 530 Accounts receivable 660 Inventories 620 Total current assets $ 1,180 $1,300 $ 1,400 Net fixed assets 2,900 3,700 3,500 Total assets $4,080 $4,900 $5,000 Liabilities and equity 2020 2021E $ 300 Accounts payable $ 400 $ 330 Notes payable 50 250 100 Accruals 200 240 Total current liabilities $ 550 $ 890 $ 700 Long-term bonds 800 1,100 1,100 Total liabilities $1,350 $ 1,990 $1,800 Common stock (100,000 shares) 1,000 1,000 1,000 Retained earnings 1,730 1,910 2,200 Total common equity $2,730 $2,910 $3,200 Total liabilities and equity $4,080 $4,900 Note: "E" denotes the "estimated forecast." 820 2019 270 $5,000 Income Statements (Millions of Dollars) 2018 $5,500 4,300 2020E $6,600 5,210 2019 $6,000 4,800 320 420 $ 460 290 370 350 Net sales Cost of goods sold (excluding depr.) Depreciation Other operating expenses Earnings before interest and taxes (EBIT) Less interest Pre-tax earnings Taxes (25%) Net income 400 108 $ 560 68 $ 492 123 $ 369 $ 352 $ 620 100 $ 520 130 $ 390 88 $ 264 Note: "E" denotes the "estimated forecast." Also, Computron has no amortization. Chapter 3 Analysis of Financial Statements Other Data 2018 2019 2020E Per Share Information EPS DPS Book value per share $ 3.69 $ 0.90 $27.30 $ 2.64 $ 0.84 $29.10 $ 3.90 $ 1.00 $32.00 $ 90 $ 279 Additional Information Dividends (millions) Additions to retained earnings (millions) Year-end shares outstanding (millions) Year-end common stock price Lease payments (millions) Tax rate 100 $ 84 S 180 100 $30.00 S 20 25% $ 100 $ 290 100 $49.00 $ 20 25% $50.00 $ 20 25% Note: "E" denotes the "estimated forecast." Ratio Analysis 2020E 2019 4.4% 7.7% 9.4% 5.4% 9.1% 6.2 31.6 Industry Average 7.2% 10.4% 15.6% 10.8% 15.4% 9.0 28.0 3.0 1.7 1.5 2.1 Ratio 2018 Profit margin 6.7% Operating profit margin 10.2% Basic earning power 13.7% ROA 9.0% ROE 13.5% Inventory turnover 7.4 Days sales outstanding 26.5 Fixed assets turnover 1.9 Total assets turnover 1.348 Current Quick 1.0 Debt ratio 20.8% Debt-to-equity ratio 0.31 Liabilities-to-assets ratio 33.1% Earnings multiplier 1.5 TIE 8.2 EBITDA coverage Price/earnings (P/E) 13.6 Market/book Note: "E" denotes the estimated forecast." 1.224 1.6 0.7 27.6% 0.46 40.6% 1.7 4.3 6.3 11.4 1.0 2.5 1.4 15.0% 0.22 30.0% 1.5 13.0 17.2 16.8 9.9 1.8 2.6 a. Why are ratios useful? What three groups use ratio analysis and for what reasons? b. Calculate the projected profit margin, operating profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these ratios? c. Calculate the projected inventory turnover, days sales outstanding (DSO), fixed as- sets turnover, and total assets turnover. How does Computron's utilization of assets stack up against that of other firms in its industry