CEE 498
Fall, 2004
HW 3
1.
For the financial statement from the lecture handout, calculate the eleven key
financial ratios (also found in lecture handout) for the 1988 financial data.
Is
this company in a sound financial position?
Discuss the ratios that fall outside
the given range (if any do).
What do these eleven ratios indicate the company
has to improve?
Quick Ratio = Total Current Assets/Current Liabilities
= 994,290 / 632,124 =
1.57
Current Ratio = Total Current Assets / Total Current Liabilities
= 994,290 / 632,124 =
1.57
Collection Period = (Accounts Receivable x 365) / Annual Sales Revenue
= 365(Contract + Account Receivable) / Annual Sales Revenue
= ((321,258 + 2439)365) / 1,825,499
=
64.7 days
Net Profit / Tangible Net Worth = Net Profit / (Total Assets – Total Liabilities)
= 144,067 / (1,022,478 – 632,124)
= .3690 x 100
=
36.9%
Net Profit / Total Assets = 144,067 / 1,022,478
= .1408 x 100
=
14.1 %
Net Sales / Tangible Net Worth = 1,825,449 / (1,022,478-632,124)
=
4.67
Net Sales / Working Capital = Net Sales / (Current Assets – Current Liabilities)
= 1,825,449 / (994,290 – 632,124)
=
5.04
General, Administrative Expenses / Tangible Net Worth = 363,421 / (1,022,478-632,124)
= .931 x 100
=
93.1%
Fixed Assets / Tangible Net Worth = (Total Property, Plant, & Equipment Assets –
Accumulated Depreciation) / Tangible Net Worth = 28,188 / 390,354
= .0722 x 100
=
7.2 %