Reebok Vs Caesar
REEBOK & LA GEAR
1. Compute financial ratios using the guidelines provided below. Use the component ratios of return on equity to explain the reasons for the difference in the profitability across the two firms. In other words, is profit margin, asset turnover or/and financial leverage responsible for the difference in profitability? Comment on the riskiness of the two companies based on the financial ratios. I would like you to compute the ratios for 1988, 1989 and 1990. Data to compute the ratios for 1990 are in the current financial statements. But to compute ratios for 1988 and 1989, you may have to get some data from notes and supplementary disclosures (all included in the case). I provide guidelines for this purpose below.
2. Assess the cash flow for …show more content…
As a potential investor, is either of these companies worth seeking further information about? What sort of information and where is it available?
Guidelines to compute ratios for Reebok and LA Gear
Return on Equity = Net income/Avg. Total Equity
Numbers to compute the ratios for 1988, 1989 and 1990 are in Selected Financial Data.
Profit Margin = Net income/Sales
Gross Margin = (Net sales – Cost of Sales)/Net Sales
Numbers to compute the ratio for 1988, 1989 and 1990 are in the Income Statements.
Total Asset Turnover = Net sales/Avg. Total Assets
Numbers to compute the ratio for 1988, 1989 and 1990 are in Selected Financial Data.
Accounts Receivable Turnover = Sales/Avg. Accounts Receivable
Sales for 1988, 1989 and 1990 are available from the Income Statements. Accounts receivable for the 1989 and 1990 are in the Balance Sheets. To get 1988 numbers, use the change in accounts receivable amount in the 1989 Statement of Cash Flows. Obtain the 1987 numbers similarly.
Inventory Turnover Ratio = Cost of Goods Sold/Avg. Inventory
Get the data from the same place as for the A/R turnover ratio.
Debt to Equity Ratio = Total Liabilities/Total Equity
Total Liabilities = Total Assets – Total
1. Compute financial ratios using the guidelines provided below. Use the component ratios of return on equity to explain the reasons for the difference in the profitability across the two firms. In other words, is profit margin, asset turnover or/and financial leverage responsible for the difference in profitability? Comment on the riskiness of the two companies based on the financial ratios. I would like you to compute the ratios for 1988, 1989 and 1990. Data to compute the ratios for 1990 are in the current financial statements. But to compute ratios for 1988 and 1989, you may have to get some data from notes and supplementary disclosures (all included in the case). I provide guidelines for this purpose below.
2. Assess the cash flow for …show more content…
As a potential investor, is either of these companies worth seeking further information about? What sort of information and where is it available?
Guidelines to compute ratios for Reebok and LA Gear
Return on Equity = Net income/Avg. Total Equity
Numbers to compute the ratios for 1988, 1989 and 1990 are in Selected Financial Data.
Profit Margin = Net income/Sales
Gross Margin = (Net sales – Cost of Sales)/Net Sales
Numbers to compute the ratio for 1988, 1989 and 1990 are in the Income Statements.
Total Asset Turnover = Net sales/Avg. Total Assets
Numbers to compute the ratio for 1988, 1989 and 1990 are in Selected Financial Data.
Accounts Receivable Turnover = Sales/Avg. Accounts Receivable
Sales for 1988, 1989 and 1990 are available from the Income Statements. Accounts receivable for the 1989 and 1990 are in the Balance Sheets. To get 1988 numbers, use the change in accounts receivable amount in the 1989 Statement of Cash Flows. Obtain the 1987 numbers similarly.
Inventory Turnover Ratio = Cost of Goods Sold/Avg. Inventory
Get the data from the same place as for the A/R turnover ratio.
Debt to Equity Ratio = Total Liabilities/Total Equity
Total Liabilities = Total Assets – Total