Calculate return on asset ratios and interpret the result

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Reference no: EM131301115

Financial Assignment

Balance Sheet as of December 31, 2010

Gary and Company

Cash  

$45

Accounts payables  

$45

Receivables    

66

Notes payables 

45

Inventory

159

Other current liabilities 

21

Marketable securities

33

Total current liabilities

$111

Total current assets 

$303

 


Net fixed assets  

147

Long Term Liabilities


Total Assets  

$450

Long-term debt  

24

 

Total Liabilities 

$135

 

 


 

Owners Equity


 

Common stock

$114

 

Retained earnings

201

 

Total stockholders' equity

315

 

 

Total liabilities and equity

$450

Income Statement Year 2010

 

 

Net sales

$795

Cost of goods sold 

660

Gross profit  

135

Selling expenses  

73.5

Depreciation

12

EBIT

49.5

Interest expense  

4.5

EBT

45

Taxes (40%)  

18

Net income

27

1. Calculate the following ratios AND interpret the result against the industry average:

Ratio

Your Answer

Industry Average

Your Interpretation
(Good-Fair-Low-Poor)

Profit margin on sales


3%


Return on assets


9%


Receivable turnover


16X


Inventory turnover


10X


Fixed asset turnover


2X


Total asset turnover


3X


Current ratio


2X


Quick ratio


1.5X


Times interest earned


7X


2. Analysis:

Give your interpretation of what the ratios calculations show and how the business can use this information to improve its performance. Justify all answers.

Reference no: EM131301115

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