Question

# Review of Financial Ratios In its closing financial statements for its first year in business, the...

Review of Financial Ratios

In its closing financial statements for its first year in business, the Runs and Goses Company, had cash of \$242, accounts receivable of \$850, inventory of \$820, net fixed assets of \$3,408, accounts payable of \$700, short-term notes payable of \$740, long-term liabilities of \$1,100, common stock of \$1,160, retained earnings of \$1,620, net sales of \$2,768, cost of goods sold of \$1,210, depreciation of \$360, interest expense of \$160, taxes of \$312, addition to retained earnings of \$508, and dividends paid of \$218. (Hint: use Excel to organized the calculations).

Calculate:

Return on equity = ??

Return on total assets = ??

Gross profit margin = ??

Net profit margin = ??

Operating profit margin = ??

Sales to total asset ratio = ??

Current ratio = ??

Debt ratio = Total debt / Total asset = ??

Debt / Equity ratio = ??

Equity multiplier = ??

Interest coverage ratio = ??

Sales to Asset Ratio = Net Sales / Total Assets

Total Assets = Cash of \$242, accounts receivable of \$850, inventory of \$820, net fixed assets of \$3,408

Tota Assets = \$5320

Sales to Asset Ratio = 2768 / 5320

Sales to Asset Ratio = .52 times

Current Ratio = Current Assets / Current Liabilities

Current assets = Total assest - Fixed assets

Current liabilities = Accounts payable + Short term notes payable

Current Ratio = (5320-3408) / (700+740)

Current Ratio = 1912 / 1440

Current Ratio = 1.32

Debt Ratio = Total debt / Total assets

Debt Ratio = 1100 / 5320

Debt Ratio = .21

Debt Equity Ratio = Debt / Equity

Equity = Common stock + Retained earnings

Debt equity ratio = 1100 / (1160 + 1620)

Debt to equity ratio = .39

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