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How liquid is the firm

Assignment Help Financial Accounting
Reference no: EM132704979

Question 1: Evaluate the firm's financial position using the following questions 1. How liquid is the firm?

Question 2: Is management generating adequate operating profits on the firm's assets?

Question 3: How is the firm financing its assets?

Question 4: Is management providing a good return on the capital provided by the shareholders?

                                  Industry Averages             Actual 2002              Actual 2003

Current ratio                      1.8                       1.84                                0.9

Acid-test ratio                     0.7                       0.78                               0.24

Average collection period               37                   36                               36

Inventory turnover                     2.5                   2.59                            2.11

Debt ratio                               58.00%                    50.00%                 61.30%

Times interest earned                     3.8                                4             2.79

Gross profit margin                       38.00%                          40              40.00%

Total asset turnover                      10.00%                          9.6             10.63%

Fixed asset turnover                        1.14%                           1.11           1.07%

Operating income return on investment     1.40%                   2.02                1.82%

Return on total assets                           11.40%                  9.60%            10.63%

Return on common equity                      4.00%                      4.00%             3.63%

Reference no: EM132704979

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