Attached are discussion questions on Financial Ratios. These questions should provide you with examples of problem sets involving financial ratios as well as practice using Excel to solve these kinds of problems. . A completed assignment means that you must make a credible attempt to solve each of the 5 questions question in the Discussion (i.e. showing underlying concepts or formulas; solution steps). The first question (4.2) has been solved, to give you a sample solution. Some hints are given for question 4.6.
Finance
4.2
| Session 3: Discussion Questions | |
| Solution: | |
| Current assets = $11,845,175 | |
| Current liabilities = $5,311,020 | |
| Quick ratio = 0.89 | |
| Quick ratio = Current Assets-Inventory / Current Liabilities | |
| (substitute what we know into the equation) | |
| .89=$11,845,175 – inventory / $5,311,020 | |
| (multiply both sides by $5,311,020) | |
| .89*$5,311,020=$11,845,175 – inventory | |
| (move our variable “inventory” to get it by itself) | |
| Inventory=$11,845,175 – (.89*$5,311,020) | |
| (solve) | |
| Inventory= | $7,118,367 |
4.2 Liquidity ratios: Flying Penguins Corp. has total current assets of $11,845,175, current liabilities of $5,311,020, and a quick ratio of 0.89. What is its level of inventory?
4.6
| Session 3 Discussion Questions | |
| Solution: | |
| Total assets = | $422,235,811 |
| Debt ratio = | 29.50% |
| (Calculate total debt) | |
| Total debt: | (Total assets * Debt ratio) |
| (Calculate total equity) | |
| Total equity: | (Total assets – Total Debt) |
| (Calculate debt to equity ratio) | |
| Debt to Equity ratio: | (Total debt / Total equity) |
| (Calculate equity multiplier) | |
| Equity Multiplier: | (Total assets / Total equity) |
4.6 Leverage ratios: Breckenridge Ski Company has total assets of $422,235,811 and a debt ratio of 29.5 percent. Calculate the company’s debt-to-equity ratio and the equity multiplier.
4.8
| Session 3 Discussion Questions | |
| Solution: | |
| Total assets turnover = | 2.23 |
| ROA = | 9.69% |
| ROE = | 16.40% |
4.8 DuPont equation: The Rangoon Timber Company has the following relationships: Sales/Total assets = 2.23; ROA = 9.69%; ROE = 16.4% What are Rangoon’s profit margin and debt ratio?
4.18
| Session 3 Discussion Questions | ||
| Solution: | ||
| Total assets = | $35.59 | Billion |
| Total debt = | 9.678 | Billion |
| Net sales = | $22.05 | Billion |
| Net profit margin = | 20% | |
| Operating profit margin = | 30% |
4.18 Profitability Ratios: Cisco Systems has total assets of $35.594 billion, total debt of $9.678 billion, and net sales of $22.045 billion. Their net profit margin for the year was 20 percent, while the operating profit margin was 30 percent. What are Cisco’s net income, EBIT ROA, ROA, and ROE?
4.22
| Session 3 Discussion Questions | |
| Solution: | |
| Sales = | $945,000.00 |
| Gross Profit Margin Total debt = | 0.279 |
| Inventory | $202,000.00 |
4.22. Dale Enterprises has sales of $945,000, a gross profit margin of 0.279 and inventory of $202,000. What is the company’s inventory turnover ratio?
