Mgmt 200 Assignment Soln 4-25-11

Mgmt 200 Assignment Soln 4-25-11 - industry average of 50...

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Management 200 – Introductory Financial Accounting– Spring 2011 Krannert School of Management - Purdue University Solutions to class assignment for April 25, 2011 Exercise 12-5 Requirement 1 Risk Ratios Calculations Receivable turnover ratio $16,000,000 ($1,400,000 + $1,000,000) / 2 = 13.3 times Average collection period 365 13.3 = 27.4 days Inventory turnover ratio $9,600,000 ($1,800,000 + $1,400,000) / 2 = 6.0 times Average days in inventory 365 6.0 = 60.8 days Current ratio $3,800 $2,020 = 1.9 to 1 Debt to equity ratio $4,320 $4,280 = 100.9% Requirement 2 Based on the above ratios, Adrian Express is more risky than the industry average. The receivable turnover, inventory turnover, and current ratios are just slightly worse than the industry averages. However, the debt to equity ratio around 100% is much worse than the
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Unformatted text preview: industry average of 50%. Exercise 12-6 Requirement 1 Profitability Ratios Calculations Gross profit ratio $6,400,000 $16,000,000 = 40.0% Return on assets $1,600,000 ($8,600,000 + $7,400,000) / 2 = 20.0% Profit margin $1,600,000 $16,000,000 = 10.0% Asset turnover $16,000,000 ($8,600,000 + $7,400,000) / 2 = 2.0 times Return on equity $1,600,000 ($4,280,000 + $3,340,000) / 2 = 42.0% Requirement 2 Adrian Express is less profitable than the industry average. The gross profit ratio, return on assets, profit margin, and asset turnover are all below the industry average. Return on equity of 42% is an exception, exceeding the industry average of 35%....
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This note was uploaded on 02/27/2012 for the course MGMT 200 taught by Professor Greigg during the Spring '08 term at Purdue.

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Mgmt 200 Assignment Soln 4-25-11 - industry average of 50...

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