H_2O Corporation is a wholesaler of scuba gear. During 2004. H_2O expanded its r

Question

H_2O Corporation is a wholesaler of scuba gear. During 2004. H_2O expanded its retail business by adding over 50 dive shops. The following information is obtained from me comparative financial statements included in the company's 2004 annual report Using the information provided above, compute the following for 2004 and 2003; Debt Ratio 2004 2003 Times interest earned ratio 2004 2003. Comment briefly on the company's solvency between 2003 and 2004 based on your ratio calculations in part I. Using the information provided above, compute the following for the years indicated below: Profit Margin % 2004 Return on Assets 2004 2003

Explanation / Answer

2004 2003 Total liabilities              55,000               24,000 Total equity              35,000               22,000 Total assets              90,000               46,000 Net Sales            175,000             123,000 Gross margin              90,000               37,000 Depreciation expense              20,000                  6,000 Interest expense              11,000                  4,000 Income tax expense              25,000               15,000 Net income              34,000               12,000 Debt ratio Total liabilities/Total assets 61.11% 52.17% Times interest earned ratio interest/EBIT                   6.36                    7.75 Profit margin Netincome/total sales 19.43% 9.76% Return on assets Net income/total assets 37.78% 26.09%

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