BUSINESS PLAN
Q1. Assume the role of Shelley Edison. Using the financial statements for Eden's Garden, calculate the 12 ratios covered in this chapter..
A1.
Current Ratio
129,936
87,622
=
1.48:1
Quick Ratio
129,936-88,157
87,622
=
.48:1
Debt Ratio
87,622,+119,846
280,843
=
74:1
Debt to Net
Worth Ratio
87,622,+119,846
73,375
=
2.83:1
Time Interest
Earned
30,189,+21,978
21,978
=
2.37:1
Average Inventory
Turnover
395,683
78,271,+86,1572
=
4.8 times/yr.
Average Collection
Period
289,484
25,952
=
11.15 times/yr
365
11.15
=
32.7 days
Average Payable
Period
403,569
54,258
=
7.44 times/yr.
365
7.44
=
49 days
Net Sales to
Net Assets
689,247
280,843
=
2.45:1
Net Sales to
Working Capital
689,247
129,936-87,622
=
16.29:1
Net Profit on
Sales
30,189
689,247
=
4%
Net Profit to
Equity
30,189
73,375
=
41%
Q2. Do you see any ratios that, on the surface, look suspicious? Explain
A2.if we go to Robert Morris Associates Annual statement studies or Dun and Bradstreet’s Key Business ratios and compare the 12 ratios calculated for Eden's Garden against businesses within this industry of a similar size (if we look under Nursery, and Lawn and Garden Supplies). Answers will vary depending on the year or edition used.
Interpreting Business Ratios-- Ratios are useful yardsticks when measuring a small firm's performance and can point out potential problems before they develop into a crisis.
A. Comparison of a firm's ratios to businesses within the same industry is a useful tool. Afirm can also develop ratios unique to its operation. Several organizations compile and publish operating statistics including key ratios. This information may be found in the following sources: 1. Robert Morris Associates
2. Dun & Bradstreet, Inc.
3. Vest Pocket Guide to Financial Ratios
4. Industry Spotlight
5. Bank of America
6. Trade associations 7. Government agencies
B. What Do All of These Numbers Mean? Learning to interpret
A1.
Current Ratio
129,936
87,622
=
1.48:1
Quick Ratio
129,936-88,157
87,622
=
.48:1
Debt Ratio
87,622,+119,846
280,843
=
74:1
Debt to Net
Worth Ratio
87,622,+119,846
73,375
=
2.83:1
Time Interest
Earned
30,189,+21,978
21,978
=
2.37:1
Average Inventory
Turnover
395,683
78,271,+86,1572
=
4.8 times/yr.
Average Collection
Period
289,484
25,952
=
11.15 times/yr
365
11.15
=
32.7 days
Average Payable
Period
403,569
54,258
=
7.44 times/yr.
365
7.44
=
49 days
Net Sales to
Net Assets
689,247
280,843
=
2.45:1
Net Sales to
Working Capital
689,247
129,936-87,622
=
16.29:1
Net Profit on
Sales
30,189
689,247
=
4%
Net Profit to
Equity
30,189
73,375
=
41%
Q2. Do you see any ratios that, on the surface, look suspicious? Explain
A2.if we go to Robert Morris Associates Annual statement studies or Dun and Bradstreet’s Key Business ratios and compare the 12 ratios calculated for Eden's Garden against businesses within this industry of a similar size (if we look under Nursery, and Lawn and Garden Supplies). Answers will vary depending on the year or edition used.
Interpreting Business Ratios-- Ratios are useful yardsticks when measuring a small firm's performance and can point out potential problems before they develop into a crisis.
A. Comparison of a firm's ratios to businesses within the same industry is a useful tool. Afirm can also develop ratios unique to its operation. Several organizations compile and publish operating statistics including key ratios. This information may be found in the following sources: 1. Robert Morris Associates
2. Dun & Bradstreet, Inc.
3. Vest Pocket Guide to Financial Ratios
4. Industry Spotlight
5. Bank of America
6. Trade associations 7. Government agencies
B. What Do All of These Numbers Mean? Learning to interpret