Case 16-55 Interpreting the Meaning of Ratios from the Financial Statements

Using the Internet, locate the most recent financial statements for two companies from the same industry. Find (or calculate) the ratios listed below, and compare the two companies. (If you cannot calculate a particular ratio, explain why.) Which company do you think is performing better? Why? Ratios:

a. Current ratio

b. Quick ratio

c. Accounts receivable turnover ratio

d. Inventory turnover ratio

e. Turnover in days

f. Times-interest-earned ratio

g. Debt ratio

h. Debt-to-equity ratio

i. Return on sales

j. Return on assets

k. Return on stockholders equity

l. Earnings per share

m. Price-earnings ratio

n. Dividend yield

o. Dividend payout ratio