Methodology: • Based on the above information the consulting group will conduct ratio analysis for the following ratios: o Current ratio o Receivable's turnover o Times's interest earned O Profit margin o Days in inventory O Return on assets O Cash current debt coverage ratio As a next step the group will compare the ratios calculated above with industry benchmarks. The benchmarks are indicated within brackets besides each ratio. o Current ratio (3 to 1) o Receivable's turnover (13 times) o Times's interest earned (9 times) o o o O Profit margin (12%) Days in inventory (50 days) Return on assets (12%) Cash current debt coverage ratio (2 times)
Methodology: • Based on the above information the consulting group will conduct ratio analysis for the following ratios: o Current ratio o Receivable's turnover o Times's interest earned O Profit margin o Days in inventory O Return on assets O Cash current debt coverage ratio As a next step the group will compare the ratios calculated above with industry benchmarks. The benchmarks are indicated within brackets besides each ratio. o Current ratio (3 to 1) o Receivable's turnover (13 times) o Times's interest earned (9 times) o o o O Profit margin (12%) Days in inventory (50 days) Return on assets (12%) Cash current debt coverage ratio (2 times)
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter12: Fainancial Statement Analysis
Section: Chapter Questions
Problem 90PSA
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Methodology:
• Based on the above information the consulting group will conduct ratio analysis for the
following ratios:
o
o Receivable’s turnover
o Times’s interest earned
o Profit margin
o Days in inventory
o Return on assets
o Cash current debt coverage ratio
• As a next step the group will compare the ratios calculated above with industry benchmarks.
The benchmarks are indicated within brackets besides each ratio.
o Current ratio (3 to 1)
o Receivable’s turnover (13 times)
o Times’s interest earned (9 times)
o Profit margin (12%)
o Days in inventory (50 days)
o Return on assets (12%)
o Cash current debt coverage ratio (2 times
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