case study - Merry Andrea A. Tejada FM 3-1 CASE 2:...

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Merry Andrea A. Tejada FM 3-1 CASE 2: ASSESSING MARTIN MANUFACTURING’S CURRENT FINANCIAL POSITION I. INTRODUCTION Terri Spiro, a budget analyst, gathered Martin Manufacturing Company’s 2003 financial statement and obtained its ratio values for 2001 and 2002, along with the 2003 industry average ratios. These are presented in the table. Actual 2001 Actual 2002 Actual 2003 Industry Average 2003 Current ratio 1.7 1.8 ____ 1.5 Quick ratio 1.0 0.9 ____ 1.2 Inventory turnover (times) 5.2 5.0 ____ 10.2 Average collection period 50 days 55 days ____ 46 days Total asset turnover (times) 1.5 1.5 ____ 2.0 Debt ratio 45.8% 54.3% ____ 24.5% Times interest earned ratio 2.2 1.9 ____ 2.5 Gross profit margin 27.5% 28.0% ____ 26.0% Net profit margin 1.1% 1.0% ____ 1.2% Return on total assets (ROA) 1.7% 1.5 ____ 2.4% Return on common equity (ROE) 3.1% 3.3% ____ 3.2% Price/earnings (P/E) ratio 33.5 38.7 ____ 43.4 Market/book (M/B) ratio 1.0 1.1 ____ 1.2 MARTIN MANUFACTURING COMPANY Income Statement
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case study - Merry Andrea A. Tejada FM 3-1 CASE 2:...

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