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(12) - 15 - Robert MacRae (260357622) Professor: Catherine...

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Robert MacRae (260357622) Professor: Catherine Fortin Accounting Pre Class Questions Chapter 12: ElectroStar Industry Average 2009 2008 2007 Current ratio 2.61 2.32 2.09 2.28 Quick ratio 1.21 1.12 1.15 1.22 Inventory turnover 2.02 2.18 2.40 3.50 Return on equity 0.17 0.15 0.14 0.11 Debt to equity ratio 1.44 1.37 1.41 0.95 Return on assets .12 .11 .11 .10 Total asset turnover 3.14 3.01 3.0 3.7 Profit margin .06 .05 .05 .05 Earnings per share .48 .45 .43 1.43 Diluted earnings per share .31 .30 .29 1.41 (a) Current Ratio: Current ratio is measured as current assets divided by current liabilities. The current ratio for ElectroStar has been climbing from steadily from 2.09 in 2007 to 2.61 in 2009. This reveals that ElectroStar is becoming more and more able to pay out their current liabilities each year and thus means their short-term liquidity is increasing. Quick Ratio: Quick ratio takes only the most liquid current assets and divides them by the current liabilities. The quick ratio for ElectroStar averages around 1.16 from 2007- 2009, which shows that the company has a number of liquid assets that will enable them to pay their liabilities as they come due. This is important information for investors and creditors. Inventory Turnover:
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This note was uploaded on 09/12/2011 for the course MGCR 211 taught by Professor La rocca during the Fall '08 term at McGill.

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(12) - 15 - Robert MacRae (260357622) Professor: Catherine...

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