Question
Once the ratio analysis is completed answer the following questions. 1. Does the firm have any problem areas that you would investigate further if you
Once the ratio analysis is completed answer
the following questions.
1.
Does the firm have any problem areas that you would investigate further if you were a
manager?
2.
Are there any other specific pieces of information that you would request from your
management team with regards to this firm? If so, why?
3.
Would you invest money in this firm based on your analysis?
Liquidity Ratios
Current ratio = Current assets / Current liabilities
Year 2015
89378 / 80610 = 1.11
Year 2014
68531 / 63448 = 1.08
Year 2013
73286 / 43658 = 1.68
Quick ratio = (Current assets Inventory) / Current liabilities
Year 2015
(89378 2349) / 80610 = 1.08
Year 2014
(68531 2111) / 63448 = 1.05
Year 2013
(73286 - 1764) / 43658 = 1.64
*All ratios rounded to two decimal places.*
Profitability Ratios
Return on Equity = Net income after taxes / Common stock holders equity
Year 2015
53394 / 119355 = 0.4474 = 44.74%
Year 2014
39510 / 111547 = 0.3542 = 35.42%
Year 2013
37037 / 123549 = 0.2998 = 29.98%
Return on Assets = Net income after taxes / Total assets
Year 2015
53394 / 290479 = 0.1838 = 18.38%
Year 2014
39510 / 231839 = 0.1704 = 17.04%
Year 2013
37037 / 207000 = 0.1789 = 17.89%
Gross Profit Margin = Gross profits / Sales
Year 2015
93626 / 233715 = 0.4006 = 40.06%
Year 2014
70537 / 182795 = 0.3859 = 38.59%
Year 2013
64304 / 170910 = 0.3762 = 37.62%
Operating Profit Margin = Operating profits / Sales
Year 2015
71230 / 233715 = 0.3048 = 30.48%
Year 2014
52503 / 182795 = 0.2872 = 28.72%
Year 2013
48999 / 170910 = 0.2867 = 28.67%
Net Profit Margin = Net income / Sales
Year 2015
53394 / 233715 = 0.2285 = 22.85%
Year 2014
39510 / 182795 = 0.2161 = 21.61%
Year 2013
37037 / 170910 = 0.2167 = 21.67%
*All ratios rounded to two decimal places.*
Activity Ratios
Inventory Turnover = Cost of goods sold / Inventory
Year 2015
140089 / 2349 = 59.64
Year 2014
112258 / 2111 = 53.18
Year 2013
106606 / 1764 = 60.43
Account Receivable Turnover = Sales / Accounts receivable
Year 2015
233715 / 16849 =13.87
Year 2014
182795 / 17460 = 10.47
Year 2013
170910 / 13102 = 13.04
Total Asset Turnover = Sales / Total assets
Year 2015
233715 / 290479 = 0.80
Year 2014
182795 / 231839 = 0.79
Year 2013
170910 / 207000 = 0.83
Average Collection Period = Sales / Accounts receivable = 365 / Receivable turnover
Year 2015
233715 / 16849 = 13.87 = 365 / 13.87 = 26.32
Year 2014
182795 / 17460 = 10.47 = 365 / 10.47 = 34.86
Year 2013
170910 / 13102 = 13.04 = 365 / 13.04 = 27.99
*All ratios rounded to two decimal places.*
Market Ratios
Earnings per Share = Net income available to common stockholders / Shares outstanding
Earnings per Share = (Net profits after taxes Preferred stock) / Shares outstanding
Year 2015
(53394000 12600000) / 5578753 = 7.31
Year 2014
(39510000 - 1260000) / 5866161= 4.59
Year 2013
(37037000 - 12600000) / 6294494 = 3.89
Price Earnings = Market price of common stock / Earnings per share
Year 2015
117.63 / 7.31 = 16.09
Year 2014
108.53 / 4.59 = 23.64
Year 2013
77.18 / 3.89 = 19.84
Market to Book = Market value per share / Book value per share
Market to Book = Market value per share / (Total stock holders equity / Shares outstanding)
Year 2015
117.63 / (119355000 / 5578753) = 117.63 / 21.39 = 5.50
Year 2014
108.53 / (111547000 / 5866161) = 108.53 / 19.02 = 5.71
Year 2013
77.18 / (123549000 / 6294494) = 77.18 / 19.63 = 3.93
*All ratios rounded to two decimal places.*
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
Accounting
Authors: Carl s. warren, James m. reeve, Philip e. fess
21st Edition
978-0324400205, 324225016, 324188005, 324400209, 9780324225013, 978-0324188004
