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Hector Company's year-end balance sheets for the past two years are as follows. The comparative income statements are as follows: Required: a) Compute the acid-test
Hector Company's year-end balance sheets for the past two years are as follows. The comparative income statements are as follows: Required: a) Compute the acid-test ratio, days' sales uncollected, times interest earned, debt-to-equity ratio for both years. Round the answers to two decimals. ( 8 marks) b) Comment on your results in part a). Specifically, comment on each ratio based on the increase/decrease between two years, and explain what the increase/decrease means or implies. (6 marks) c) The year-end share price is $20 and $15 for the current and previous year-end, respectively. What is Hector's price-earnings ratio? Is Hectors' or its main competitor's price-earnings ratio higher? What does a higher price-earnings ratio mean? (3 marks) d) (i) Which group(s) of financial ratios (refer to the 4 building blocks of financial statement analysis) would you use to evaluate the CEO's performance? (ii) List at least two relevant ratios that are useful when conducting the evaluation. If d) (i) has more than one group, list at least one relevant ratio from each group
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