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East Coast Yacht Solution

Topics: Financial ratios, Financial ratio, Balance sheet Pages: 5 (1482 words) Published: June 12, 2012
1-Compute all industry ratios presented for East Coast Yachts and COMPARE and comment on each ratio as compared to the Industry Median. (60pts)

Industry ratios presented for East Coast Yachts

Current ratio = $11,270,000 / $15,030,000
Current ratio = 0.75 times

Quick ratio = ($11,270,000 – 4,720,000) / $15,030,000
Quick ratio = 0.44 times

Total asset turnover = $128,700,000 / $83,550,000
Total asset turnover = 1.54 times

Inventory turnover = $90,700,000 / $4,720,000
Inventory turnover = 19.22 times

Receivables turnover = $128,700,000 / $4,210,000
Receivables turnover = 30.57 times

Total debt ratio = ($83,550,000 – 42,570,000) / $83,550,000 Total debt ratio = 0.49 times

Debt-equity ratio = ($15,030,000 + 25,950,000) / $42,570,000 Debt-equity ratio = 0.96 times

Equity multiplier = $83,550,000 / $42,570,000
Equity multiplier = 1.96 times

Interest coverage = $18,420,000 / $2,315,000
Interest coverage = 7.96 times

Profit margin = $9,663,000 / $128,700,000
Profit margin = 7.51%

Return on assets = $9,663,000 / $83,550,000
Return on assets = 11.57%

Return on equity = $9,663,000 / $42,570,000
Return on equity = 22.70%

Liquidity or Short-Term Solvency Ratios
Calculate and compare to industry ratios:
| East Coast Yachts | Lower Quartile| Median| Upper Quartile| Positive, Negative, or Neutral Relative to Industry | Current Ratio| 0.75| 0.50| 1.43| 1.89| NegativeIt is not positive as it is lower than median. It shows that company has fewer current assets to pay its current liabilities than industrial average.| Quick Ratio| 0.44| 0.21| 0.38| 0.62| PositiveIt is positive as it little higher than median. It shows that company has little more quick assets than to pay its current liabilities than industrial average.|

Asset Management or Turnover Ratios
Calculate and compare to industry ratios:
| East Coast Yachts | Lower Quartile| Median| Upper Quartile| Positive, Negative, or Neutral Relative to Industry | Assets Turnover | 1.54| 0.68| 0.85| 1.38| PositiveIt is positive. It shows that company uses assets more effectively than industrial average.| Inventory Turnover | 19.22| 4.89| 6.15| 10.89| PositiveIt is positive. It shows that company uses inventory more effectively than industrial average.| Receivables Turnover | 30.57| 6.27| 9.82| 14.11| PositiveIt is positive. It shows that company uses account receivable more effectively than industrial average.|

Long-Term Solvency Ratios
Calculate and compare to industry ratios:
| East Coast Yachts | Lower Quartile| Median| Upper Quartile| Positive, Negative, or Neutral Relative to Industry | Debt Ratio | 0.49| 0.44| 0.52| 0.61| PositiveIt is positive. It shows that company reliance on debt to finance total assets is less than industrial average.| Debt-Equity Ratio | .99| 0.79| 1.08| 1.56| PositiveIt is positive. It shows that company reliance on debt in total financing is less than Industrial average| Equity Multiplier | 1.96| 1.79| 2.08| 2.56| NUETRALIt is neutral as it’s is slightly less than median. It means that the total assets are increasing the equity less than industrial average.| Interest Coverage | 7.96| 5.18| 8.06| 9.83| NeutralIt seems positive. It means that company earns more profit to pay interest as compared to industrial average.| Profitability Measures

Calculate and compare to industry ratios:
| East Coast Yachts | Lower Quartile| Median| Upper Quartile| Positive, Negative, or Neutral Relative to Industry | Profit Margin | 7.51| 4.05%| 6.98%| 9.87%| PositivePositive investment quality| Return on Assets | 11.57| 6.05%| 10.53%| 13.21%| PositiveThe management of available resources is at least adequate, although there may still be room for improvement in how those resources are used| Return on Equity | 22.70| 9.93%| 16.54%| 26.15%| PositiveReturn on equity is more than what the market is earning,...
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