H_2 O Corporation is a wholesaler of scuba gear. During 2004, H2O expanded its r

Question

H_2 O Corporation is a wholesaler of scuba gear. During 2004, H2O expanded its retail business by adding over 50 dive shops. The following information is obtained ohm me comparative financial statements included in the company's 2004 annual report (all amounts are in thousands): Using the information provided above, compute the following for 2004 and 2003: A. Debt Ratio 2004 2003 B. Times interest earned ratio 2004 2003 2. Comment briefly on the company's solvency between 2003 and 2004 based on your ratio calculations in part 1. 3. Using the information provided above, compute the following for the years indicated below: A. Profit Margin % 2004 B. Return on Assets 2004

Explanation / Answer

2004 2003 Debt Ratio Debt/equity ratio 55000/35000 24000/22000 1.57 1.09 Times interest earned EBIT/ interest expense. (90000-20000)/11000 (37000-6000)4000 6.36 7.75 Debt ratio Increased and Time Interest earned Declined shows increase in debt and decrease in interest repayment based on current earrnigs 2004 2003 Profit Margin Net Income /Sales 34000/175000 =12000/123000 19.43% 9.76% Return On Asset Net Income /Total Asset 34000/90000 12000/46000 37.78% 26.09%

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