Edit View History Bookmarks People Window Help Do Homework - Nicholas Mouton htt

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Edit View History Bookmarks People Window Help Do Homework - Nicholas Mouton https://www.mathxl.com/Student/PlayerHomework.aspx?homeworkld-503579194&questionld-5&flushed Fin 301-01 (Fall 2018) Nichc Homework: Chapter 4 Homework Score: 0 of 14 pts Problem 4-9 (similar to 5 of 8 (2 complete) (Ratio analysis) Using Pamplin Inc's financial statements shown in the popup window a. Compute the ratios in the popup window, EEl. for 2014 and 2015 to compare both against the industry normas. b. How liquid is the firm? c. Are its managers generating an adequate operating profit on the firm's assets? d. How is the firm financing its assets? e. Are its managers generating a good return on equity? Note: 15% of sales are cash sales, with the remaining 85% being credit sales. a. Compute the following ratios for 2014 and 2015 to compare both against the industry norms. Round the numbers to two decimal piaces and select your evaluation from the drop-down menu.) Industry Norm 2014 2015 Current ratio Enter your answer in the edit fields and then click Check Answer Clear All 13 partaining 8 2 WE

Explanation / Answer

Current Ratio:
2014:
=1205/205=5.87804878
2015:
=1206/296=4.074324324

The company had performed better than industry in 2014 but worse in 2015. Less liquid than industry in 2015 and more liquid in 2014.

Acid test ratio
2014:
=(1205-552)/205=3.185365854
2015:
=(1296-630)/296=2.25

The company had performed better than industry in 2014 but worse in 2015. Less liquid than industry in 2015 and more liquid in 2014.

Inventory turnover
2014:
=702/552=1.27173913
2015:
=848/630=1.346031746

Average collection period
2014:
=365*452/(1202*0.85)=161.4759714
2015:
=365*425/(1445*0.85)=126.2975779

Debt ratio
2014:
=(2394-1593)/1202=0.666389351
2015:
=(2602-1710)/1445=0.617301038

Firm is mainly financing through debt

Times Interest earned
2014:
=247/52=4.75
2015:
=357/64=5.578125

Total asset turnover
2014:
=1202/2394=0.502088555
2015:
=1445/2602=0.555342045

FIxed asset turnover
2014:
=1202/1189=1.010933558
2015:
=1445/1396=1.035100287

Operating profit margin
2014:
=247/1202=20.5490849%
2015:
=357/1445=24.7058824%

Return on common equity
2014:
=117/1593=7.3446328%
2015:
=176/1710=10.2923977%

Managers are generating good return on equity

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