Chapter 7, Problem 1Q

Which of the following ratios measures financial leverage? a. The return on assets ratio. b. The inventory turnover ratio. c. The times interest earned ratio. d. The debt to equity ratio.

From the given Statement of Financial Position and Income statement, solve for the following: 1) Compute the FINANCIAL ratios that measure:    a) Liquidity         -Current Ratio          -Quick Ratio         -Working Capital         -Cash Ratio    b) Leverage         -Degree of Operating Leverage         -Financial Leverage Ratio         -Total Debt to Total Capital Ratio         -Debt to Equity Ratio         -Long Term Debt to Equity Ratio         -Debt to Asset Ratio         -Times Interest Earned    c) Operating Activity         -Accounts Receivable Turnover         -Days Sales in Receivable         -Inventory Turnover         -Days in Inventory    d) Profitability         -Earnings per Share         -Return on Asset         -Return on Equity         -Operating Profit Margin         -Net Profit Margin 2) Analyze, interpret, and draw conclusions based on the results of your computations.

Based on the income statement given calculate and explain the :profitability ratioa. Gross profit ratio = gross profit/net salesb. Operating margin ratio =operating income/net salesc. Asset Turnover ratio = net sales / total assetsd. Return on equity ratio = net sales/ shareholders equity Leverage ratioa. interest coverage ratio =operating income / interest expensesb. Debt service ratio=operating income/debt service

Using the statements provided Calculate the following liquidity ratios: Current ratio Quick ratio   Calculate the following asset management ratios: Average collection period Inventory turnover Fixed asset turnover Total asset turnover   Calculate the following financial leverage ratios Debt to equity ratio Long-term debt to equity   Calculate the following profitability ratios: Gross profit margin Net profit margin Return on assets Return on stockholders’ equity   For example: you should present it like the text, or as:Gross margin  = 1,933 divided by 8,689 = 22.2%     A competitor of ACME has for the same time period reported the following three ratios:   Current ratio                                1.52Long-term debt to equity             .25 or 25%Net profit margin                         .08 or 8%   Given these three ratios only which company is performing better on each ratio? Also overall who would you say has the best financial performance and position. Support your answer.

In a DuPont analysis, what are the components of return on assets?a. Net Profit Margin Ratio and Debt Ratiob. Net Profit Margin Ratio and Leverage Ratioc. Net Profit Margin Ratio and Asset Turnover Ratiod. Asset Turnover Ratio and Leverage Ratio

Using the information from 27A prepare the following ratios: gross profit margin profit margin return on assets earnings per share current ratio acid test ratio debt ratio Indicate what each is used for (ie: measuring efficiency, solvency etc)

Calculate the following ratios: net profit margin gross profit margin return on assets/ROI return on equity current ratio quick ratio debt-to-equity times interest earned

Based on the income statement given calculate and explain the :profitability ratioa. Gross profit ratio = gross profit/net salesb. Operating margin ratio =operating income/net salesc. Asset Turnover ratio = net sales / total assetsd. Return on equity ratio = net sales/ shareholders equity Leverage ratioa. interest coverage ratio =operating income / interest expenses

A ratio that measures a company’s profitability is thea. leverage ratio.b. gross margin percentage.c. current ratio.d. times-interest-earned ratio.