Discussion

1. If a company has a Debt-to-Equity ratio of 5, but the industry average is 7, what does it mean?
2. James Corporation has the following info on its balance sheets: Cash $40; accounts/receivable =$30; inventories =$100;

net fixed assets = $500; accounts payable =$20, accruals $10; short term debt (matures in less than a year) =$25; long term

debt =$200; total common equity = $415. Its income statement reports: sales = $820; cost of goods sold (excluding

depreciation) = $450; depreciation-$50, other operating expenses = $100; interest expense = $20; tax rate is 25%.

• Calculate the following ratios:
• Net profit margins
• Operating profit margin
• Return on total assets
• Return on common equity