Using the financial statements provided calculate the financial ratios for the p
ID: 2679813 • Letter: U
Question
Using the financial statements provided calculate the financial ratios for the past year(refer to your textbook for help). You will need to calculate all of the Liquidity and Asset Management ratios, Total debt to total assets ratio, all of the Profitability ratios, the P/E and M/B ratio.INCOME STATEMENT FOR YEAR ENDING DECEMBER 31, 2011 (In Millions) Liquidity Ratios
% of Current Current Assests/Current Liabilites
Amount Total Sales Quick (CA - Inventories)/Current Liabilites
Net sales $1,500.0 100.00%
Variable operating costs (82% of sales) (1,230.0) 82.00 Asset Management
Gross profit 270.0 18.00 Inventory Turnover Cost of Goods Sold / Inventories
Fixed operating costs except depreciation (90.0) 6.00 DSO Receivables/ (sales/365)
Earnings before interest, taxes, depreciation, and amortization (EBITDA) 180.0 12.00 Fixed Asset Turnover Sales/ Net Fixed Assests
Depreciation (50.0) 3.33 Total Asset Turnover Sales/Total Assets
Net operating income (NOI) = Earnings before interest and taxes (EBIT) 130.0 8.67
Interest (40.0) 2.67 Debt Management
Earnings before taxes (EBT) 90.0 6.00 Total Debt to Total Asset Total Debt/Total Assests
Taxes (40%) (36.0) 2.40 Times Interest Earned EBIT/Interest Expense
Net income $54.0 3.60
Profitability
Preferred dividends - Profit Margin on Sales Net Income/Sales
Earnings available to common stockholders (EAC) 54.0 Return on Assests Net Income/Total Assets
Common dividends (29.0) Basic Earning Power EBIT/Total Assets
Addition to retained earnings 25.0 Return on Equity Net Income/Common Equity
Per share data (25,000,000 shares): Market Value
Numbers of Shares Outstanding 25.0 Price Earnings Ratio Price of Shares/Earning Per Share
Earnings per share: (Net income)/Shares Dividends per share $2.16 Price/cash flow Price of Shares/Cash Flow per Share
Market/Book Market Price/Book Value (Per Share)
(Common dividends)/Shares $1.16
Cash Flow:
BALANCE SHEET AS OF DECEMBER 31, 2011 (In Millions) Net Income
Amount Dividends
Assets Depreciation
Cash and equivalents $15.0 Net Cash Flow
Accounts receivables 180.0 Cash Flow / Share
Inentory 270.0
Total current assets 465.0
Net plant and equipments 380.0
TOTAL ASSEST $845.0
Liabilities and Equity
Accounts Payable $30.0
Accruals 60.0
Notes payable 40.0
Total current liabilities 130.0
Long-Term Debt 300.0
TOTAL LIABILITIES (DEBT) $430.0
Common stock (25 million shares) $130.0
Retained Earnings 285.0
TOTAL COMMON EQUITY 415.0
Total Liability & Common Equity $845.0
Book value per share = (Common equity)/Shares $16.60
Explanation / Answer
Ratio 2008 2007 2006 Current 0.79:1 0.78:1 1.22:1 Quick 0.52:1 0.57:1 0.9:1 Inventory turnover 9.9 times 10.9 times 10.8 times Receivable turnover 29.5 days 32.5 days 30.6 days Fixed asset turnover 0.7 times 0.65 times 0.61 times Total asset turnover 0.58 times 0.54 times 0.50 times Total debt ratio 0.52 0.52 0.54 Interest cover 12 times 12.3 times 12 times Profit margin 14.46% 13.9% 12.71% Return on investment 8.39% 7.49% 6.4% Return on equity 17.38% 15.49% 13.8% P/E ratio 18.4 times 20.28 times 22.2 times Price/cash flow 9.3 times 8.6 times 8.3 times Market price/book value 3.1 times 3.1 times 3.1 times The calculations are as under Current ratio = current assets/current liabilities The calculations are as follows 2008 2007 2006 =24515/30958 =0.79:1 =24031/30717 =0.78:1 =24392/19985 =1.22:1 Quick ratio=(current assets-inventory)/current liabilities The calculations are as follows 2008 2007 2006 =(24515-8416)/30958 =0.52:1 =(24031-6819)/30717 =0.57:1 =(24392-6291)/19985 =0.90:1 Inventory turnover = sales/year-end inventory The calculations are as follows 2008 2007 2006 =83503/8416 =9.9 times =74476/6819 =10.9 times =68222/6291 =10.8 times Receivables turnover = (receivables/sales)*365 The calculations are as follows 2008 2007 2006 =(6761/83503)*365 =29.5 days =(6629/74476)*365 =32.5 days =(5725/68222)*365 =30.6 days Fixed asset turnover = sales/fixed assets The calculations are as follows 2008 2007 2006 =83503/119477 =0.70 times =74476/113983 =0.65 times =68222/111366 =0.61 times Total asset turnover = sales/total assets The calculations are as follows 2008 2007 2006 =83505/143992 =0.58 times =74476/138014 =0.54 times =68222/135695 =0.50 times Total debt ratio = total debt/total assets The calculations are as follows 2008 2007 2006 =74498/143992 =0.52 =71254/138014 =0.52 =72787/135695 =0.54 Interest cover = earnings before interest and tax/interest charge The calculations are as follows 2008 2007 2006 =17545/1467 =12 times =16104/1304 =12.3 times =13532/1119 =12 times Profit margin=(net income/sales) *100 The calculations are as follows 2008 2007 2006 =(12075/83503)*100 =14.46% =(10340/74476)*100 =13.9% =(8684/68222)*100 =12.71% Return on investment = (net income/total assets)*100 The calculations are as follows 2008 2007 2006 =(12075/143992)*100 =8.39% =(10340/138014)*100 =7.49% =(8684/135695)*100 =6.4% Return on equity = (net income/shareholders' equity) * 100 The calculations are as follows 2008 2007 2006 =(12075/69494)*100 =17.38% =(10340/66760)*100 =15.49% =(8684/62908)*100 =13.8% P/E ratio = market price per share/ earnings per share The calculations are as follows 2008 2007 2006 =71.01/3.86 =18.4 times =65.31/3.22 =20.28 times =61.91/2.79 =22.2 times Price/cash flow = market price per share/cash flow per share The calculations are as follows 2008 2007 2006 =71.01/7.634 =9.30 times =-65.31/7.59 =8.6 times =61.91/7.5 =8.3 times Market price/book value = market price per share/book value per share The calculations are as follows 2008 2007 2006 =71.01/22.91 =3.1 times =65.31/21.36 =3.1 times =61.91/19.79 =3.1 times
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