Tim Gillespie Week 1 Watson Comp Problem

Tim Gillespie Week 1 Watson Comp Problem - Tim Gillespie...

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Tim Gillespie FIN 400 Chapter 3 Comprehensive Problem Watson Leisure Time Sporting Goods Selected Industry Ratios Profitability Ratios 200x 200y 200z 200x 200y 200z 1. Profit Margin Net Income / Net Sales 6.26% 5.63% 5.56% 5.75% 5.80% 5.81% Profit margin was above industry average - last 2 years below average 2. Return on Assets (Investment) a. Net Income / Total Assets 9.39% 7.79% 6.34% 8.22% 8.24% 8.48% Lower - Due to low turnover ratio b. Net Income / Sales x Sales / Total Assets 9.39% 7.79% 6.34% 8.22% 8.24% 8.48% 3. Return on Equity a. Net Income / Stockholders' Equity 17.07% 15.73% 14.25% 13.26% 13.62% 14.16% Return on equity - higher than industry average - Good b. Return on Assets / (1-Debt/Assets) 17.07% 15.73% 14.25% 13.26% 13.62% 14.16% Asset Utilization Ratios 4. Receivables Turnover Sales / Receivables 10 x 8 x 7 x 10 x 9.5 x 10.1 x Lower 5. Average Collection Period AR / Avg Daily Credit Sales 36 days 46 days 55 days 36 days 37.9 days 35.6 days Much Lower - takes much longer to collect recievables
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