Financial Ratios for East Coast Yachts

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• Published : December 2, 2012

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Question 1:
Financial ratios for East Coast Yachts:
Current ratio| =| Current Assets| | | Debt-equity ratio| =| Total liabilities| | | Current Liabilities| | | | | Total equity|
| =| \$14,651,000 | | | | =| \$19,539,000 + \$33,735,000| | | \$19,539,000 | | | | | \$55,341,000 |
| =| 0.75| | | | =| 0.96|
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Quick ratio| =| Current Assets - Inventory| | | Equity multiplier| =| Total assets| | | Current Liabilities| | | | | Total equity|
| =| \$14,651,000 - \$6,136,000| | | | =| \$108,615,000 | | | \$19,539,000 | | | | | \$55,341,000 |
| =| 0.44| | | | =| 1.96|
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Total asset turnover| =| Sales| | | Interest coverage| =| EBIT| | | Total Assets| | | | | Interest|
| =| \$167,310,000 | | | | =| \$23,946,000 |
| | \$108,615,000 | | | | | \$3,009,000 |
| =| 1.54| | | | =| 7.96|
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Inventory turnover| =| COGS| | | Profit margin| =| Net Income| | | Inventory| | | | | Sales|
| =| \$117,910,000 | | | | =| \$12,562,200 |
| | \$6,136,000 | | | | | \$167,310,000 |
| =| 19.22| | | | =| 7.51%|
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Receivables turnover| =| Sales| | | Return on assets| =| Net Income| | | Accounts receivable| | | | | Total assets|
| =| \$167,310,000 | | | | =| \$12,562,200 |
| | \$5,473,000 | | | | | \$108,615,000 |
| =| 30.57| | | | =| 11.57%|
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Debt ratio| =| Total assets - Total equity| | | Return on equity| =| Net Income| | | Total assets| | | | | Total equity|
| =| \$108,615,000 - \$55,341,000| | | | =| \$12,562,200 | | | \$108,615,000 | | | | | \$55,341,000 |
| =| 0.49| | | | =| 22.70%|
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Question 2:
| | East Coast Yachts| | Yacht Industry Ratios|
| | | | Lower Quartile| Median| Upper Quartile|
Current ratio| | 0.75| | 0.50| 1.43| 1.89|
Quick ratio| | 0.44| | 0.21| 0.38| 0.62|
Total asset turnover| | 1.54| | 0.68| 0.85| 1.38|
Inventory turnover| | 19.22| | 4.89| 6.15| 10.89|
Receivables turnover| | 30.57| | 6.27| 9.82| 14.11|
Debt ratio| | 0.49| | 0.44| 0.52| 0.61|
Debt-equity ratio| | 0.96| | 0.79| 1.08| 1.56|
Equity multiplier| | 1.96| | 1.79| 2.08| 2.56|
Interest coverage| | 7.96| | 5.18| 8.06| 9.83|
Profit margin| | 7.51%| | 4.05%| 6.98%| 9.87%|
Return on assets| | 11.57%| | 6.05%| 10.53%| 13.21%| Return on equity| | 22.70%| | 9.93%| 16.54%| 26.15%|

The liquidity ratio shows that the company has less liquidity as compare to the whole industry. East Coast Yachts current ratio is below the median industry ratio and the quick ratio is positioned at the median industry ratio. This indicates that the company may access to short-term borrowing.

Referring to the turnover ratio, all the three ratios, I.e. total asset turnover, inventory turnover and receivables turnover are higher than upper quartile industry ratio. This indicates that the company is more efficient among the whole industry in using its assets to generate sales.

The financial leverage ratios, which include the debt ratio, debt-equity ratio, equity multiplier and interest coverage, are all below the median industry ratio, but higher than the lower quartile. This shows that East Coast Yachts is having less debt than the other companies in the industry, but is still within the normal range.

The profit margin, return on assets as well as return on equity of the company are higher than the industry median. This shows that the company’s profitability is performing well among the whole industry.

As an overall, East...