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).
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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