Compute the ratios listed below for these two financial statements. Explain what

Question

Compute the ratios listed below for these two financial statements. Explain what information the ratio provides.

Balance Sheet

Income Statement

Ratios

Current Ratio

Quick Ratio

Debt-to-Equity Ratio

Inventory Turnover Ratio

Return on Assets Ratio

Return on Equity Ratio

Period Ending Dec 30, 1995 Jan 1, 1994 Assets Current Assets: Cash And Cash Equivalents 11,761 10,399 Short Term Investment - - Net Recievables 138,595 131,921 Inventory 61,987 65,924 Other Current Assets 26,872 33,068 Total Current Assets 239,215 241,312 Long Term Investments - - Property Plant and Equipment 351,979 361,617 Goodwill 102,049 102,049 Intangible Assets 524,353 524,695 Accumulated Amortization - - Other Assets 58,560 53,801 Deferred Long Term Assets - - Total Assets 1,276,156 1,283,474 Liabilities Current Liabilities: Accounts Payable 182,877 191,082 Short/Current Long Term Debt 25,939 25,230 Other Current Liabilities - - Total Current Liabilities 208,816 216,312 Long Term Debt 437,616 467,737 Other Liabilities 216,390 259,022 Deferred Long Term Liability Charges 153,408 140,965 Minority Interest 68,606 64,179 Negative Goodwill - - Total Liabilities 1,084,836 1,148,215 Stockholders Equity - - Misc.Stock Options Warrants - - Redeemable Preferred Stock - - Preferred Stock - - Common Stock 12,939 12,919 Retained Earnings 188,869 170,439 Treasury Stock 61,254 61,254 Capital Surplus 108,942 107,681 Other Stockholder Equity 58,176 94,526 Total Stockholder Equity 191,320 135,259 Net Tangible Assets 435,082 491,485

Explanation / Answer

Current ratio = Current assets / Current liabilities

Dec 30,1995 :

Curreny ratio = 239215 / 208816 = 1.15

Jan 1, 1994:

Current ratio = 241312 / 216312 = 1.12

Quick ratio = Current assets - inventory / current liabilities

Dec30,1995:

Quick ratio = 239215 - 61987 / 208816

= 0.85

Jan 1, 1994:

Quick ratio = 241312 - 65924 / 216312

= 0.81

Debt to Equity ratio = long term debt / equity share holders fund

Dec 30,1995:

Debt to equity ratio = 437616 / 191320 = 2.29

Jan 1 , 1994 :

Debt to equity ratio = 467737 / 135259 = 3.46

Inventory turnover ratio = cost of goods sold / average inventory

Dec30, 1995:

Inventory turnover ratio = 982691 / 61987 = 15.85

Jan1, 1994:

Innventory turnover ratio = 960124 / 65924 = 14.56

Return on assets = net income / total assets

Dec 30, 1995 :

Return on assets = 27675 / 1276156 = 2.17%

Jan1,1994:

Return on assets = 27217 / 1283474 = 2.12%

Return on equity = net income / equity share holders fund

Dec30,1995 :

Return on equity = 27675 / 191320 = 14.47%

Jan 1, 1994:

Return on equity = 27217 / 135259 = 20%

Ratios Dec 30, 1995 Jan 1,1994 Current ratio 1.15 1.12 Quick ratio 0.85 0.81 Debt to Equity ratio 2.29 3.46 Inventory turnover ratio 15.85 14.56 Return on Assets ratio 2.17% 2.12% Return on Equity ratio 14.47% 20%

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