busn 5200 week 4 homework
BUSN 5200
Homework Assignment for Week 4:
For Week 4, please complete the following for Joe’s Fly-By-Night Oil Company, whose financial statements are shown below:
• Prepare a ratio analysis for the fiscal year ended Dec 31, 2012. Organize your analysis per the following outline:
(1) Liquidity - Current ratio: 25,000/17,000=1.47%
Quick ratio: 25,000-17,000/17,000=25,000
Comments on liquidity- The results cant really determine how well or bad the company is doing until you compare it to another company. This ratio helps show the ability to pay off short term obligations as they are due.
(2) Asset management - Total Asset turnover: 10,000/40,000=.25
Average collection period (ACP): 10,000/365=27 3,000/27=111 days
Comments on asset management- Each $1 of asset is producing .25 in sales. Using assest utilization shows why one firm turns over assests more rapied than another. Average collection period states that it’s taking the customer around 111days to pay off their bills. This indicates how long sales stay on companys books.
(3) Debt management - Debt ratio: 20,000/40,000=50%
Times interest earned: 3,000/200=15 times
Comments on debt management- Times interest earned shows the number of times that income before interest and taxes covers the interest obligation . The higher the ration the stronger the interest paying ability of the firm .
(4) Profitability - Net profit margin:1800/10,000= 18%
-Return on Assets (ROA): 1800/40,000= 4.5%
-Return on Equity (ROE): 1800/20,000= 9.0%
Extended Du Pont equation: .25x.18-0.045(4.5%)
Comments on profitability to include your comments on the sources of ROE revealed by the Du Pont equation These types of ratios indicate if the firm is making any money, and how much in relation to whats invested. They also give you an
Homework Assignment for Week 4:
For Week 4, please complete the following for Joe’s Fly-By-Night Oil Company, whose financial statements are shown below:
• Prepare a ratio analysis for the fiscal year ended Dec 31, 2012. Organize your analysis per the following outline:
(1) Liquidity - Current ratio: 25,000/17,000=1.47%
Quick ratio: 25,000-17,000/17,000=25,000
Comments on liquidity- The results cant really determine how well or bad the company is doing until you compare it to another company. This ratio helps show the ability to pay off short term obligations as they are due.
(2) Asset management - Total Asset turnover: 10,000/40,000=.25
Average collection period (ACP): 10,000/365=27 3,000/27=111 days
Comments on asset management- Each $1 of asset is producing .25 in sales. Using assest utilization shows why one firm turns over assests more rapied than another. Average collection period states that it’s taking the customer around 111days to pay off their bills. This indicates how long sales stay on companys books.
(3) Debt management - Debt ratio: 20,000/40,000=50%
Times interest earned: 3,000/200=15 times
Comments on debt management- Times interest earned shows the number of times that income before interest and taxes covers the interest obligation . The higher the ration the stronger the interest paying ability of the firm .
(4) Profitability - Net profit margin:1800/10,000= 18%
-Return on Assets (ROA): 1800/40,000= 4.5%
-Return on Equity (ROE): 1800/20,000= 9.0%
Extended Du Pont equation: .25x.18-0.045(4.5%)
Comments on profitability to include your comments on the sources of ROE revealed by the Du Pont equation These types of ratios indicate if the firm is making any money, and how much in relation to whats invested. They also give you an