Also indicate how the firm finances its assets using a debt and equity Address

# Also indicate how the firm finances its assets using

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Also indicate how the firm finances its assets using a debt and equity Address the question : Has the firm earned adequate returns on its investments 14 15 Find the following financial ratios for Smolira Golf Corp. (use year-end figures rather than average values where appropriate): 16 Short-term solvency ratios: a. 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 b. 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 c. 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 d. Total asset turnover = Sales / Total assets Total asset turnover = \$305,830 / \$321,075 = 0.95 times e. Inventory turnover = Cost of goods sold / Inventory Inventory turnover = \$210,935 / \$24,650 = 8.56 times f. Receivables turnover= Sales / Accounts receivable Receivables turnover = \$305,830 / \$13,850 = 22.08 times In the final exam, unless otherwise stated, to calculate the turnover ratios, please use average figures in the denominators. 17 Long-term solvency ratios: g. 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 h. 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 i. Equity multiplier = 1 + D/E Equity multiplier 2008 = 1 + 0.65 = 1.65 Equity multiplier 2009 = 1 + 0.66 = 1.66 j. Times interest earned = EBIT / Interest Times interest earned = \$68,045 / \$11,930 = 5.70 times k. Cash coverage ratio = (EBIT + Depreciation) / Interest Cash coverage ratio = (\$68,045 + 26,850) / \$11,930 = 7.95 times Profitability ratios: 2009 l. Profit margin = Net income / Sales Profit margin = \$36,475 / \$305,830 = 0.1193 or 11.93% m. Return on assets = Net income / Total assets Return on assets = \$36,475 / \$321,075 = 0.1136 or 11.36% n. Return on equity = Net income / Total equity Return on equity = \$36,475 / \$192,840 = 0.1891 or 18.91% 