2009-03-25_094953_Yacht_Case_Ans

2009-03-25_094953_Yacht_Case_Ans - 1. Calculate all of the...

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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) Debt-equity 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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j) 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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This note was uploaded on 11/01/2010 for the course FINANCE 650 taught by Professor Johnson during the Spring '10 term at University of Maryland Baltimore.

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2009-03-25_094953_Yacht_Case_Ans - 1. Calculate all of the...

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