What was the cash
coverage ratio for the year?
Cash Coverage ratio = EBITDA/interest
Net Sales
- COGS
- SG&A
EBITDA
- Depr/ Amort
EBIT
- Interest expense
EBT
- Taxes
EAT or NI
NI
= (1 – t)EBT
EBT = $13,168 / (1 – 0.34) = $19,951.52
EBIT = EBT + Interest paid = $19,951.52 + 3,605
= $23,556.52
EBITD = EBIT + Depreciation = $23,556.52 + 2,382
= $25,938.52
Cash coverage ratio = EBITD / Interest
= $25,938.52 /
$3,605 = 7.20 times
7
Calculate Short-term solvency ratios
Calculate Asset utilization ratios
Calculate Long-term solvency ratios
Calculate Profitability ratios
#5:

8
9
Find the following financial ratios for Smolira Golf Corp.
(use year-end
figures rather than average values where appropriate):

10
Short-term solvency ratios:
Current ratio
= Current assets / Current liabilities
Current ratio 2008
= $56,260 / $38,963 = 1.44 times
Current ratio 2009
= $60,550 / $43,235 = 1.40 times
Quick ratio
= (Current assets – Inventory) / Current liabilities
Quick ratio 2008
= ($56,260 – 23,084) / $38,963 = 0.85 times
Quick ratio 2009
= ($60,550 – 24,650) / $43,235 = 0.83 times
Cash ratio
= Cash / Current liabilities
Cash ratio 2008
= $21,860 / $38,963 = 0.56 times
Cash ratio 2009
= $22,050 / $43,235 = 0.51 times
Asset utilization ratios: 2009
Total asset turnover = Sales / Total assets
Total asset turnover = $305,830 / $321,075 = 0.95 times
Inventory turnover
= Cost of goods sold / Inventory
Inventory turnover
= $210,935 / $24,650 = 8.56 times
Receivables turnover= Sales / Accounts receivable
Receivables turnover = $305,830 / $13,850 = 22.08 times
11
Long-term solvency ratios:
Total debt ratio
= (Total assets – Total equity) / Total assets
Total debt ratio 2008
= ($290,328 – 176,365) / $290,328 = 0.39
Total debt ratio 2009
= ($321,075 – 192,840) / $321,075 = 0.40
Debt-equity ratio
= Total debt / Total equity
Debt-equity ratio 2008
= ($38,963 + 75,000) / $176,365 = 0.65
Debt-equity ratio 2009
= ($43,235 + 85,000) / $192,840 = 0.66
Equity multiplier
= 1 + D/E
Equity multiplier 2008
= 1 + 0.65 = 1.65
Equity multiplier 2009
= 1 + 0.66 = 1.66
Times interest earned
= EBIT / Interest
Times interest earned
= $68,045 / $11,930 = 5.70 times
Cash coverage ratio
= (EBIT + Depreciation) / Interest
Cash coverage ratio
= ($68,045 + 26,850) / $11,930 = 7.95 times
Profitability ratios: 2009
Profit margin
= Net income / Sales
Profit margin
= $36,475 / $305,830 = 0.1193 or 11.93%
Return on assets
= Net income / Total assets
Return on assets
= $36,475 / $321,075 = 0.1136 or 11.36%
Return on equity
= Net income / Total equity
Return on equity
= $36,475 / $192,840 = 0.1891 or 18.91%

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