East Coast Yatchs Solution
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
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