Solution-Calculate return on asset ratios and interpret the

Calculate return on asset ratios and interpret the result

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Reference no: EM131301115

Financial Assignment

Balance Sheet as of December 31, 2010
Gary and Company
Cash	$45	Accounts payables	$45
Receivables	66	Notes payables	45
Inventory	159	Other current liabilities	21
Marketable securities	33	Total current liabilities	$111
Total current assets	$303
Net fixed assets	147	Long Term Liabilities
Total Assets	$450	Long-term debt	24
		Total Liabilities	$135

		Owners Equity
		Common stock	$114
		Retained earnings	201
		Total stockholders' equity	315
		Total liabilities and equity	$450

Income Statement Year 2010

Net sales	$795
Cost of goods sold	660
Gross profit	135
Selling expenses	73.5
Depreciation	12
EBIT	49.5
Interest expense	4.5
EBT	45
Taxes (40%)	18
Net income	27

1. Calculate the following ratios AND interpret the result against the industry average:

Ratio	Your Answer	Industry Average	Your Interpretation (Good-Fair-Low-Poor)
Profit margin on sales		3%
Return on assets		9%
Receivable turnover		16X
Inventory turnover		10X
Fixed asset turnover		2X
Total asset turnover		3X
Current ratio		2X
Quick ratio		1.5X
Times interest earned		7X

2. Analysis:

Give your interpretation of what the ratios calculations show and how the business can use this information to improve its performance. Justify all answers.

Reference no: EM131301115

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Calculate return on asset ratios and interpret the result

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Reference no: EM131301115

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