What is the: 1) Profit margin (show work) 2) Current ratio (show work) 3) Debt r

Question

What is the:

1) Profit margin (show work)

2) Current ratio (show work)

3) Debt ratio (show work)

4) Equity ratio (show work)

5) What do these financials tell you about this firm? Is it in good standing? Bad? Why? Elaborate.

September 30 1998 1997 Assets Total current assets 30.489 28,164 Property and equipment, net Goodwill, net Other assets 10,605 43,485 1,163 12,766 45,172 1,504 Total Assets $85,742 $86,606 Liabilities and Stockholders' Deficit Total current liabilities 42,595 30.400 860 840 42,489 Long-term debt and capital lease obligations Other long-term liabilities, less current portion Guarantee of Employee Stock Ownership Plan loan 24,409 134 364 Redeemable preferred stock Stockholders' Deficit: 64,804 62,659 Common stock Additional paid-in capital (deficit) Indebtedness of Employee Stock Ownership Plan Accumulated deficit 4 (32,095) (364) 14,003 46,458 4 (32,595) (840) 16,317 49.748 Total stockholders' deficit Total Liabilities and Stockholders' Deficit $85,742 $87,606

Explanation / Answer

1) Profit Margin = Net income / sales

For 1996, PM = -7092/213856 = -3.32%

For 1997, PM = 0.13% and for 1998, PM = 2.54%

2) Current Ratio = Current Assets / Current Liabilities

For 1997, CR = 28,164 / 42,595 = 0.66, For 1998, CR = 30489 / 42489 = 0.72

3) Debt Ratio = Debt / Total Assets

For 1997, DR = 30400 / 86606 = 0.35, For 1998, DR = 24409 / 85742 = 0.28

4) Equity Ratio = Equity / Total Assets

As Equity is negative, equity ratio is not meaningful.

5) The firm was in a bad shape going through difficult times but it is gradually improving. Two years back it posted losses and this year it posted profits. The debt ratio has lowered and current ratio has improving, highlighting an improvement in the company's financials.

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