Reference no: EM13393456

Over the past year, M.D. Tyner & Co. has realized an increase in its current ratio and a drop in its total assets turnover ratio. However, the company’s sales, quick ratio, and fixed assets turnover ratio have remained constant. What explains these changes? 3-5 How might (a) seasonal factors and (b) different growth rates distort a comparative ration analysis? Give some examples. How might these problems be alleviated? 3-6 Why is it sometimes misleading to compare a company’s financial ratios with those of other firms that operate in the same industry? PROBLEMS: 3-1 Greene Sisters has a DSO of 20 days. The company’s average daily sales are $20,000. What is the level of its accounts receivable? Assume there are 365 days in a year. Donaldson & Son has a ROA of 10% , a 2% profit margin, and a return on equity equal to 15%. What is the company’s total assets turnover? What is the firm’s equity multiplier? 3-11 Complete the balance sheet and sales information in the table that follows for Hoffmeister Industries using the following financial data: Debt ratio: 50% Quick ration: 0.80 Total assets turnover: 1.5 Days sales outstanding: 36.5 days* Gross profit margin on sales: (Sales – Cost of goods sold)/Sales =25% Inventory turnover ratio: 5.0 *Calculation is based on a 365 day year. Balance Sheet Cash ________ Accounts payable ________ Accounts receivable ________ Long-term debt 60,000 Inventories _______ Common stock _______ Fixed assets _______ Retained earnings 97,500 Total assets $300,000 Total liabilities and equity _______ Sales ________ Cost of goods sold