Solution-Calculate the financial ratios for both firms

Calculate the financial ratios for both firms

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Reference no: EM13750217 , Length:

Ratio Analysis

The following information concerns two competitors, Albertson Ltd. and Celtic Corp.

Balance Sheets
		Albertson		Celtic
ASSETS
Cash and marketable securities	$	79,580	$	152,594
Accounts receivable		45,477		81,233
Inventory		213,210		47,326
Net capital assets		212,290		222,290
Total assets	$	550,557	$	503,443

LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term bank loans	$	60,146	$	22,032
Accounts payable		61,276		24,360
Accruals		39,028		20,278
Long-term debt		102,116		143,555
Common shares		201,826		195,408
Retained earnings		86,165		97,810
Total liabilities and shareholders' equity	$	550,557	$	503,443

Income Statements
Sales	$	771,201	$	817,666
Cost of goods sold		620,954		671,782
Gross margin		150,247		145,884
Selling and administrative expenses		56,276		66,290
Amortization		27,014		26,632
Miscellaneous expenses		8,919		14,228
EBIT		58,038		38,734
Interest on short-term debt		6,015		2,040
Interest on long-term debt		12,945		14,016
EBT		39,078		22,678
Taxes		8,770		5,632
Net income	$	30,308	$	17,046

Calculate the financial ratios for both firms required to answer each of the following questions. Show all your calculations and explain your answer.

a. To which firm would you, as a credit manager or short-term lender, be most likely to approve the extension of short-term trade credit or grant a short-term loan?

b. To which one would you, as a banker, be most likely to extend long-term credit?

c. In which firm would you, as an investor, be most likely to buy shares?

d. What criteria should be applied to assess whether a ratio favourable or not?

Reference no: EM13750217

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Calculate the financial ratios for both firms

Reference no: EM13750217 , Length:

Reference no: EM13750217

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