East Coast Yatchs Solution

Only available on StudyMode
  • Download(s) : 369
  • Published : July 3, 2012
Open Document
Text Preview
EAST COAST YACHTS

1.The calculations for the ratios listed are:

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 = $90,070,000 / $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%

2.Regarding the liquidity ratios, East Coast Yachts current ratio is below the median industry ratio. This implies the company has less liquidity than the industry in general. However, the current ratio is above the lower quartile, so there are companies in the industry with lower liquidity than East Coast Yachts. The company may have more predictable cash flows, or more access to short-term borrowing.

The turnover ratios are all higher than the industry median; in fact, all three turnover ratios are above the upper quartile. This may mean that East Coast Yachts is more efficient than the industry in using its assets to generate sales.

The financial leverage ratios are all below the industry median, but above the lower quartile. East Coast Yachts generally has less debt than comparable...
tracking img