Ratios and Financial Planning at East Coast Yachts

Name: Jacob Armstrong
Assignment 1-6 Worksheet
1. Read the closing case “Ratios and Financial Planning at East Coast Yachts” in chapter 3 of your textbook.
2. Based on the information provided, answer the questions below:
Part I:
A. Calculate the following ratios for East Coast Yachts and compare them to those for the industry:

Liquidity or Short-Term Solvency Ratios
Calculate and compare to industry ratios:

East Coast Yachts
Lower Quartile
Median
Upper Quartile
Positive, Negative, or Neutral Relative to Industry
Current Ratio
1.12
0.86
1.51
1.97
Neutral
Quick Ratio
.66
0.43
0.75
1.01
Neutral

Asset Management or Turnover Ratios
Calculate and compare to industry ratios:

East Coast Yachts
Lower Quartile
Median
Upper Quartile
Positive, Negative, or Neutral Relative to Industry
Assets Turnover
1.51
1.10
1.27
1.46
Positive
Inventory Turnover
19.22
12.18
14.38
16.43
Positive
Receivables Turnover
30.57
10.25
17.65
22.43
Positive

Long-Term Solvency Ratios
Calculate and compare to industry ratios:

East Coast Yachts
Lower Quartile
Median
Upper Quartile
Positive, Negative, or Neutral Relative to Industry
Debt Ratio
.48
0.32
0.47
0.61
Neutral
Debt-Equity Ratio
.92
0.51
0.83
1.03
Neutral
Equity Multiplier
1.92
1.51
1.83
2.03
Neutral
Interest Coverage
7.96
5.72
8.21
10.83
Neutral

Profitability Measures
Calculate and compare to industry ratios:

East Coast Yachts
Lower Quartile
Median
Upper Quartile
Positive, Negative, or Neutral Relative to Industry
Profit Margin
7.51%
5.02%
7.48%
9.05%
Neutral
Return on Assets
11.34%
7.05%
10.67%
14.16%
Neutral
Return on Equity
21.76%
9.06%
14.32%
20.83%
Positive

B. Based on your calculations and comparisons above, how would you characterize East Coast Yacht’s performance relative to its industry?
The company is about average in the industry based on the calculations above. The company is showing some promise and it is positive in all of the turnover ratio