Financial Ratios in Business Analysis
Number one:
Soaring Eagles Corp. has total current assets
of $11,818,000, current liabilities of $5,280,000 and a quick ratio of 0.79.
What is its level of inventory?
Solution:
QR= CA – I / CI
0.79 = $ 11818,000 / $ 5280000
(0.79) $ 528000 = $11,818, 000 – I
I = $ 11, 818,000 –$ 4,171,200
=$7,646800
Number 2
Boulder Mountain Ski Company has total assets of $419,500,000 and a debt ratio of 0.29. Calculate the company’s debt-to-equity ratio. Round to two decimal places.
Solution:
DEBT RATIO = TOTAL LIABILITIES DEVIDED BY TOTAL ASSETS
0.29 = TL /$ 419, 500, 000.
TOTAL LIABILITIES = $419, 500,000* 0.29
LIABILITIE; EQUITY RATIO = $121,655,000: $ 419,500,000
= 29: 100
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Number three:
The Timber Ridge Company has the following relationships:
Sales/Total assets = 2.05; ROA = 0.1010
What is Timber Ridge’s net profit margin? Round to 3 decimal places.
Solution:
Sales/ total assets = 2.05
RAO = 0.1010
RAO = Total margin* TAT
Profit margin = RAO/ TAT
0.1010/ 2.05
= 0.050
Number four:
Sawaya Company had depreciation and amortization expenses of $522,311, interest expenses of $114,077, and an EBITDA of $1,521,087 for the year ended June 30, 2010. What is the Times Interest Earned for this company?
Solution:
Amortization expenses of $522,311
EBITDA of $1,521,087
Interest expenses $114077
TIE = EBIT/ INTEREST EXPENSES
= $1521,087/ $114077
EBIT = EBITDA – Amortization expense
=$1521087-$522311
=$ 998,776
TIE =$ 998,776/$ 114077
TIE= 8.755
Number five:
Archware Systems has total assets of $35.594
billion, total debt of $9.678 billion, and net sales of $23.830 billion. Their net profit margin for the year was 0.15, while the operating profit
margin was 30 percent. What is Archware’s net income? (Answer needs to be stated in billions. For example: 2.83) Round to two decimal places.
Solution:
Total assets = $35.594 billion
Total debt = $9.678 billion
Net sales = $23.830 billion
Net profit margin= 0.15
Operating margin profit = 30 percent
Net income = net sales * net profit margin
NI = $23. 830*0.15
=3.5745
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Number six:
Blue Air Inc., has net sales of $710,000 and accounts receivables of $162,000. What are the firm’s accounts receivables turnover? Round to two decimal places.
Solution:
Accounts receivable turnover = net sales/ accounts receivable
= $710,000/ $ 162,000
=4.38
Number seven:
JP Vineyards has sales of $854,000, a gross profit margin of 0.396, and inventory of $177,000. What is the company’s inventory turnover ratio? Round to two decimal places.
Solution:
Sales = $854,000
Gross profit margin = 0.396
Inventory = $177,000
Inventory turnover ratio = COGS/ INVENTORY
COGS = SALES – SALS *GPM
COGS =$ 854,000 –$ 854,000*0.396
COGS = $515,816
COGS/ Inventory =$ 515,816/ $177,000
= 2.9142
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