1.
Calculate all of the ratios listed in the industry table for East Cost
Yachts.
Ans.
Ratios Calculation
2006
a) Current Ratio
0.75
b) Quick Ratio
0.44
c) Total Asset Turnover
1.54
d) Inventory Turnover
19.22
e) Receivables Turnover
30.57
f) Debt Ratio
0.49
g) Debt to Equity Ratio
0.96
h) Equity Multiplier
1.96
i) Interest Coverage
7.96
j) Profit Margin
7.51%
k) Return on Assets
11.57%
l) Return on Equity
22.70%
Working Notes:
a) Current ratio = $11,270,000 / $15,030,000
= 0.75 times
b) Quick ratio = ($11,270,000 – 4,720,000) / $15,030,000
= 0.44 times
c) Total asset turnover = $128,700,000 / $83,550,000
= 1.54 times
d) Inventory turnover = $90,070,000 / $4,720,000
= 19.22 times
e) Receivables turnover = $128,700,000 / $4,210,000
= 30.57 times
f) Total debt ratio = ($83,550,000 – 42,570,000) / $83,550,000
= 0.49 times
g) Debtequity ratio = ($15,030,000 + 25,950,000) / $42,570,000
= 0.96 times
h) Equity multiplier = $83,550,000 / $42,570,000
= 1.96 times
i) Interest coverage = $18,420,000 / $2,315,000
= 7.96 times
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View Full Documentj) Profit margin = $9,663,000 / $128,700,000
= 7.51%
k) Return on assets = $9,663,000 / $83,550,000
= 11.57%
l) Return on equity = $9,663,000 / $42,570,000
= 22.70%
2.
Compare the performance of East Cost Yacht to the industry as a hole.
For each ratio, comment on why it might be viewed as positive or negative
relative to the industry. Suppose you create an inventory ratio calculated as
inventory divided by current liabilities. How do you interpret this ratio?
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 Spring '10
 Johnson
 Corporate Finance, Debt, Ratio, Financial Ratio, East Coast, East Coast Yachts

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