magents

Topics: Financial ratios, Financial ratio, Generally Accepted Accounting Principles Pages: 4 (997 words) Published: October 4, 2014
1. Magnetronics' profit as a percentage of sales for 1996 was $1,307,000 divided by $48,769,000, or 2.68%.

2. This represented a decrease from 3.602% in 1992.

1992 profitability ratio = 1171 / 32513 = 0.036016363 or 3.602%

3. The deterioration in profitability resulted from an increase in cost of goods sold as a percentage of sales, and from an increase in operating expenses as a percentage of sales. The only favorable factor was the decrease in the interest expense as a percentage of sales. and Federal Income Taxes.

1992 COGS / Sales = 19183/32513 = 0.59001015 or 59.001%
1996 COGS / Sales = 29700/48769 = 0.608993418 or 60.899%

1992 Ops Expense / Sales = 10758/32513 = 0.330883031 or 33.088% 1996 Ops Expense / Sales = 16541/48769 = 0.339170375 or 33.917%

1992 Int Expense / Sales = 361/32513 = 0.011103251 or 1.11% 1996 Int Expense / Sales = 517/48769 = 0.010600997 or 1.06%

4. Magnetronics had a total of $22,780,000 of capital at year end 1996 and earned before interest but after taxes (EBIAT) $1,824,000 during 1996.

1996 EBIAT = 19069 -16541-704 = 1824

Its return on invested capital is calculated as follows:

Earnings before interest but after taxes (EBIAT)
Owners' equity plus interest bearing debt

In 1996 this figure was 11.08%, which represented a decrease from the 13.55% earned in 1992.

1996 return on invested capital = 1824 / (12193 + 3056 + 1213) = 0.110800632

1992 EBIAT = 13330-10758-1040 = 1532
1992 return on invested capital = 1532 / (7692 + 2750 + 864) = 0.135503273

5. Magnetronics had $12,193,000 of owners' equity and earned $1,307,000 after taxes in 1996. Its return on equity was 10.719%, a deterioration from 15.224% earned in 1992.

1996 return on equity = 1307 /12193 = 0.107192652
1992 return on equity = 1171 / 7692 = 0.152236089

Activity Ratios: Are there any hidden problems?

1. Total asset turnover for Magnetronics in 1996 can be calculated by dividing $22,780...
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