LO2 34. Ratios and Foreign Companies Prince Albert Canning PLC had a net loss of 32,415 on sales of 515,380. What was the company's profit margin? Does the fact that these figures are quoted in a foreign currency make any difference? Why? In dollars, sales were $689,785. What was the net loss in dollars? Some recent financial statements for Smolira Golf, Inc., follow. Use this information to work Problems 35 through 38. Page 90 SMOLIRA GOLF, INC. Balance Sheets as of December 31, 2018 and 2019 2018 2019 2018 2019 Assets Liabilities and Owners' Equity Current liabilities $ 5,298 $ 5,827 Accounts payable $ 3,754 $ 3,986 eceivable 7,707 8,477 Notes payable 3,045 3,318 12,150 21,956 Other 152 179 $25,155 $ 36,260 Total $ 6,951 $ 7,483 Long-term debt $24,700 $ 16,000 Owners' equity Common stock and paid-in surplus $40,000 $ 37,000 Accumulated retained earnings 28,805 55.189 nd equipment $75,301 $ 79,412 Total $68,805 $ 92,189 $100,456 $115,672 Total liabilities and owners' equity $100,456 $115,672 SMOLIRA GOLF, INC. 2019 Income Statement Sales $229,854 184,317 Cost of goods sold Depreciation 8.730 EBIT $ 36,807 1,811 Interest paid Taxable income $ 34,996 7 340 Taxes 7,349 $ 27,647 Net income Dividends Additions to retained earnings $16,000 11,647 LO2 35. Calculating Financial Ratios Find the following financial ratios for Smolira Golf (use year-end figures rather than average values where appropriate): Calculating Financial Ratios Find the following financial ratios for Smolira Golf (use year-end figures rather than average values where appropriate): Short-term solvency ratios a. Current ratio b. Quick ratio c. Cash ratio 11 Asset utilization ratios d. Total asset turnover e. Inventory turnover f. Receivables turnover Long-term solvency ratios g. Total debt ratio h. Debt-equity ratio i. Equity multiplier j. Times interest earned ratio k. Cash coverage ratio Profitability ratios Page 91 1. Profit margin m. Return on assets n. Return on equity DuPont dontity Construct the DuPont LO3 36. LO2 37. DuPont Identity Construct the DuPont identity for Smolira Golf. Market Value Ratios Smolira Golf has 10,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2019 was $73. What is the price-earnings ratio? What is the price-sales ratio? What are the dividends per share? What is the market-to-book ratio at the end of 2019? Interpreting Financial Ratios After calculating the ratios for Smolira Golf, you have uncovered the following industry ratios for 2019: LO2 38. Lower Upper Lower Quartile Median Upper Quartile Current ratio 1.3 2.6 5.3 2.1 2.7 4.1 Total asset turnover Debt-equity ratio Profit margin .23 .50 .60 8.4% 11.2% 16.3% How is Smolira Golf performing based on these ratios? LO2 34. Ratios and Foreign Companies Prince Albert Canning PLC had a net loss of 32,415 on sales of 515,380. What was the company's profit margin? Does the fact that these figures are quoted in a foreign currency make any difference? Why? In dollars, sales were $689,785. What was the net loss in dollars? Some recent financial statements for Smolira Golf, Inc., follow. Use this information to work Problems 35 through 38. Page 90 SMOLIRA GOLF, INC. Balance Sheets as of December 31, 2018 and 2019 2018 2019 2018 2019 Assets Liabilities and Owners' Equity Current liabilities $ 5,298 $ 5,827 Accounts payable $ 3,754 $ 3,986 eceivable 7,707 8,477 Notes payable 3,045 3,318 12,150 21,956 Other 152 179 $25,155 $ 36,260 Total $ 6,951 $ 7,483 Long-term debt $24,700 $ 16,000 Owners' equity Common stock and paid-in surplus $40,000 $ 37,000 Accumulated retained earnings 28,805 55.189 nd equipment $75,301 $ 79,412 Total $68,805 $ 92,189 $100,456 $115,672 Total liabilities and owners' equity $100,456 $115,672 SMOLIRA GOLF, INC. 2019 Income Statement Sales $229,854 184,317 Cost of goods sold Depreciation 8.730 EBIT $ 36,807 1,811 Interest paid Taxable income $ 34,996 7 340 Taxes 7,349 $ 27,647 Net income Dividends Additions to retained earnings $16,000 11,647 LO2 35. Calculating Financial Ratios Find the following financial ratios for Smolira Golf (use year-end figures rather than average values where appropriate): Calculating Financial Ratios Find the following financial ratios for Smolira Golf (use year-end figures rather than average values where appropriate): Short-term solvency ratios a. Current ratio b. Quick ratio c. Cash ratio 11 Asset utilization ratios d. Total asset turnover e. Inventory turnover f. Receivables turnover Long-term solvency ratios g. Total debt ratio h. Debt-equity ratio i. Equity multiplier j. Times interest earned ratio k. Cash coverage ratio Profitability ratios Page 91 1. Profit margin m. Return on assets n. Return on equity DuPont dontity Construct the DuPont LO3 36. LO2 37. DuPont Identity Construct the DuPont identity for Smolira Golf. Market Value Ratios Smolira Golf has 10,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2019 was $73. What is the price-earnings ratio? What is the price-sales ratio? What are the dividends per share? What is the market-to-book ratio at the end of 2019? Interpreting Financial Ratios After calculating the ratios for Smolira Golf, you have uncovered the following industry ratios for 2019: LO2 38. Lower Upper Lower Quartile Median Upper Quartile Current ratio 1.3 2.6 5.3 2.1 2.7 4.1 Total asset turnover Debt-equity ratio Profit margin .23 .50 .60 8.4% 11.2% 16.3% How is Smolira Golf performing based on these ratios
