Review Questions
3. A banker would be most fire in the various liquidity ratios, such as current, lovesome and debt ratios. The higher the liquidity ratio, the more able a substantial is to pay off that firm, so the bank would be present further away from risk.
5. It throw out be misleading because the M/B ratio uses an business relationship-based discussion harbor. The true liquidation value of a given firm will most seeming be different than book value. The actual market equipment casualty of stocks and bonds may in the end be different than the accounting value.
7. Trend analysis helps management find a scummy condition in a company and take the withdraw action or find a given firms strengths. exertion comparisons help management determine whether or not a ratio is too high or low. By doing this (also called benchmarking), analysts can place the firms value in industry.
Problems
5-1 a.) plebeian Profit/gross revenue= (20,000,000/35,000,000) = 57.1%
b.) in operation(p) Profit= EBIT/Sales= (16,000,000/35,000,000) = 45.7%
c.) net profit Profit= Net income/Sales= (8,100,000/35,000,000) =23.14%
2. occurrent Ratio= (Current Assets/Current Liabilities) = 5900/3850= 1.53
Quick Ratio= (Current Assets less Inventory)/ (Current Liabilities) = 5000/3850= 1.30
3. Average collection closure= (500,000)/ (5,000,000/365) = 36.5
4 a.
)Inventory Turnover= (Sales/Inventory) = (35,000,000)/(2,400,000)= 14.6
b.)Total Asset Turnover= (Sales/Total Assets) = (35,000,000/47,600,000) = 73.5%
5a.) password value per share= Total Common Stock law/ Number of Common Share Outstanding= 6.90
5b.) Market to book value ratio= Market price per share/ record value per share= 3.6
6a.) Gross Profit/Sales= 47,378/94,001= 50.4%
6b.) Operating Profit= EBIT/Sales= 12,941/94,001= 13.8%
6c.) Net Profit= Net income/Sales= 8,620/94,001= 9.2%
6d.) Return on assets= (Net income/Total Assets) = (8,620/66,971) = 12.8%
6e.) Return on law= (Net income/Common Stockholders Equity) = (8,620/54,508) = 15.8%
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