Question
Data for Unilate Textiles 2015 financial statements are given in Tables 2.1 and 2.2 in the chapter. a. Compute the 2015 values of the following
Data for Unilate Textiles 2015 financial statements are given in Tables 2.1 and 2.2 in the chapter.
a. Compute the 2015 values of the following ratios:
2015 Values
RatioUnilateIndustry
Current ratio 3.9x
Days sales outstanding 33.5 days
Inventory turnover7.2x
Fixed assets turnover 4.1x
Debt ratio43.0%
Net profit margin 4.6%
Return on assets 9.9%
b.Briefly comment on Unilates 2015 financial position. Can you see any obvious strengths or weaknesses?
c.Compare Unilates 2015 ratios with its 2016 ratios, which are presented in Table 2.6. Comment on whether you believe Unilates financial position improved or deteriorated during 2016.
| Ratio | Formula for Calculation | Computation | Ratio Value | Industry Average | Comment | ||||
| Liquity | |||||||||
| Current | = Current assets__ Current liabilities | $235.0 $65.0 | = | 3.6x | 4.1x | Low | |||
| Quick, or acid test | = Current assets Inventory Current liabilities | $100.0 $65.0 | = | 1.5x | 2.1x | Low | |||
| Asset Management Inventory turnover | = Cost of goods sold Inventory | $600.0 $135.0 | = | 4.4x | 7.4x | Low | |||
| Days sales out- standing (DSO) | = Accounts receivable | $90.0 $2.08 | = | 43.2 days | 32.1 days | Poor | |||
| Fixed assets turnover | = ___Sales_______ Net fixed assets | $750.0 $190.0 | = | 3.9x | 4.0x | OK | |||
| Total assets turnover | = Sales Total assets | $750.0 $425.0 | = | 1.8x | 2.1x | Low | |||
| Debt Management Debt-to-total-assets | = Total liabilities Total assets | $217.0 $425.0 | = | 51.1% | 42.0% | Poor | |||
| Times interest earned (TIE) | = EBIT________ Interest charges | $65.0 $20.0 | = | 3.3x | 6.5x | Low | |||
| Fixed charge coverage | = ____EBIT+ Lease payments Interest Lease Sinking fund payments charges + payments + (1 Tax rate) | $70.0 $31.7 | = | 2.2x | 5.8x | Low | |||
| Profitability Net profit margin | = Net income Sales | $27.0 $750.0 | = | 3.6% | 4.9% | Poor | |||
| Return on total Assets (ROA) | = Net income Total assets | $27.0 $425.0 | = | 6.4% | 11.5% | Poor | |||
| Return of equity (ROE) | =Net income available to common stockholders Common equity | $27.0 $208.0 | = | 13.0% | $17.7 | Poor | |||
| Market Value Price/Earnings(P/E) | =Market price per share Earnings per share | $20.00 $2.45 | = | 8.2x | 15.0x | Low | |||
| Market/Book (M/B) | =Market price per share Book value per share | $20.00 $18.91 | = | 1.1x | 2.2x | Low |
d.What other information would be useful for projecting whether Unilates financial position is expected to improve or deteriorate in the future?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Relevance Lost The Rise And Fall Of Management Accounting
Authors: Robert S. Kaplan, H. Thomas Johnson
1st Edition
0875841384, 9780875841380
