Question

Give a short explanation of your conclusions about Barnes and Noble after each category of ratios (i.e. How liquid is the company? How efficiently is it using its assets? etc.).

Liquidity and Efficiency
Current Ratio	= Current assets / Current liabilities	1.45
Acid-test ratio	= Cash + Short-term investments + Current receivables / Current liabilities	0.27
Accounts receivable turnover	= Net sales / Average accounts receivable, net	20.52	times
Inventory turnover	= Cost of goods sold / Average inventory	6.45	times
Days' sales uncollected	= Accounts receivable, net / Net sales * 365	17.62	days
Days' sales in inventory	= Ending inventory / Cost of goods sold *365	113.19	days
Total asset turnover	= Net sales / Average total assets	2.05	times
Solvency -
Debt ratio	= Total liabilities / Total assets	0.52
Equity ratio	= Total equity / Total assets	0.48
Debt-to-equity ratio	= Total liabilities / Total equity	0.91
Times interest earned	= Income before interest expense and income taxes / Interest expense	(3.83)	times
Profitability
Profit margin ratio	= Net income / Net sales	-1%
Gross margin ratio	= Net sales - Cost of goods sold / Net sales	26%
Return on total assets	= Net income / Average total assets	-2%
Return on common stockholders' equity	= Net income - Preferred dividends / Average common stockholders' equity	-5%
Book value per common share	= Shareholders' equity applicable to common shares / Number of common shares outstanding	$9.53
Basic earnings per share	= Net income - Preferred dividends / Weighted-average common shares outstanding	$ (0.52)
Market Prospects
Price-earnings ratio	= Market price per common share / Earnings per share	(3.26)	times
Dividend yield	= Annual cash dividends per share / Market price per share	0.0%

Answer 1

Liquidity and Efficiency

In terms of liquidity, company is unable to pay off its quick assets as the ratio is less than 1 but current asset ratio is 1.45 which means company would be able to pay off its current liabilities. In terms of efficiency, its doing good. Inventory turnover ratio is adequately high which represent strong sales and also, its coverting its receivables and total assets into sales pretty well.

Solvency

Debt Equity ratio of 0.91 suggests that company is not using the cheapest source of finance fully. And a negative times interest earned ratio means company is not even able to cover its interest expenses.

Profitability

Company's profitability is in a bad position. Profit margin is negative which means company is in losses. Return on total assets is negative as company is not utilising its assets well.