Calculation of operating profit margin

Reference no: EM1315954

Calculation of Operating Profit Margin and Time interest earned.

Utilizing the attached Enclosure 1 "Balance Sheet and Income Statement for Spectrum, Inc"

ENCLOSURE 1

Spectrum, Inc. BALANCE SHEET (000)
Cash	$500
Accounts receivable	1,500
Inventories	500
Current assets	2,500
Net fixed assets	5,000
Total Assets	$7,500.00

Accounts payable	1,200
Bank note	300
Total current liabilities	1,500
Long term debt	4,000
Common stock	300
Retained earnings	1,700
Total liabilities and owner's equity	$7,500

Spectrum, Inc. INCOME STATEMENT (000)
Net sales	$8,500
Cost of goods sold	3,400
Gross profit	5,100
Operating expenses	2,900
Net operating income	2,200
Interest expense	580
Earnings before taxes	1,620
Income tax (34%)	551
Net income	$1,069

a) Compute the following ten (10) financial ratios and provide a one sentence explanation of the analytic use of each ratio test. Show your formulas and input. Accuracy to two decimal points is sufficient.
b) Evaluate how Spectrum's financial performance compares to their Industry for each calculated ratio. It is sufficient to rate each ratio as "G"= good, "S" = satisfactory, or "P" = poor.

	Industry Norms
Operating profit margin	8.3%
Times interest earned	3.93

Reference no: EM1315954

Questions Cloud

Identifying error in the given statement related to sample : The researcher found that Lincoln's educational score did not correlate with the expected variables.

What would happen to the stock markets rate of return : Risk and return involves calculation of stock's beta and expected return and what would happen to the stock markets rate of return?

Calculation of tradable pollution permits : Assume that there are two power generating plants that emit SO 2 (sulphur dioxide). In the absence of regulation they each emit 10 tons of pollution per month.

Find the unknown price from the information : Find the unknown price from the information

Calculation of operating profit margin : Calculation of Operating Profit Margin and Time interest earned and find how Spectrum's financial performance compares to their Industry for each calculated ratio.

Computation of cost of capital : Computation of cost of capital and compute the cost of capital of investing in a project with a beta of 0.8

Data and correlation matrix : The management of a regional bus line thought its cost of gas might be correlated with its passenger/mile ratio. Comment on the data and correlation matrix below.

Calculation of debt ratio and total asset turnover ratio : Calculation of Debt Ratio and Total Asset Turnover Ratio and Compute the following ten financial ratios and provide a one sentence explanation of the analytic use of each ratio test. Show your formulas and input.

Correlation and testing the significance of correlation : A Correlation matrix (correlation, coefficients and probability level under the hypothesis rho = 0) for a company's sales force (age, years of service, and current sales) is given below. Comment.

User Account

All Pages