Homework 7 - Homework 7 FY1987 FY1988 Activity Ratios...

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Homework 7 FY1987 FY1988 Activity Ratios Inventory turnover COGS/ Year - End Inventory 70,756/ 19,577 =3.61 94,934/ 39,135 =2.43 Receivable turnover Revenue/ End AR Bal. 128,234/ 27,801 =4.61 181,123/ 51,076 =3.55 Payables turnover COGS/ AP Bal. 70,756/ 15,072 =4.69 94,934/ 13,288 =7.14 Liquidity ratios Current ratio Current Assets/ Current Liabilities 49,341/ 24,059 =2.05 94,111/ 23,030 =4.09 Quick Ratio (Current Assets- Inventory)/Current Liabilities (49,341- 19,577)/24,059 =1.24 (94,111- 39,135)/20,030 =2.74 Solvency Ratios Debt Ratios Debt to assets ratio Total debt/ Total assets (19,841+900)/ 65,241 =0.32 (62,057+1,250)/ 118,140 =0.53 Debt to equity ratio Total debt/ Total shareholders’ equity (19,841+900)/ 20,087 =1.03 (62,057+1,250)/ 31,172 =2.03 Coverage Ratios Interest Coverage EBIT/ Interest Payments 21,904/3,189 =6.87 14,878/1,584 =9.39 Profitability Ratios Return on sales
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GP Margin Revenue-COGS/ Revenue (128,234- 70,756)/ 128,234 =0.45 (181,123- 94,934)/ 181,123 =0.48 Operating profit margin Operating income/ Revenue 14,878/ 128,234 =0.12 21,904/ 181,123 =0.12 Net profit margin Net Income/ Revenue 7,105/ 128,234 =0.06 10,954/ 181,123 =0.06 Comments on ratios: Inventory ratio: This is a measure of how many times inventory is sold during the period. The inventory turnover is somehow less in the current year than the previous one. Considering the company’s increase in advertising expenditures and increase in new products, it is questionable as to why their inventory turnover has decreased. Receivable turnover: This is used to quantify a firm's effectiveness in issuing and collecting debts on credit.The
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