Tests of Profitability Profitability is a primary measure of the overall success of a company and is necessary for a company’s survival. Several test of profitability focus on measuring the adequacy of income by comparing it to other items reported on the financial statements. 1) Return on Equity: One of the most important profitability ratios is return on equity (ROE). ROE is the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s
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= 17‚582‚000/23‚689‚300 = 0.74 Quick Ratio = (Current Assets – Inventories)/Current Liabilities =(17‚582‚0007‚363‚700)/23‚689‚300 =0.43 Total Asset Turnover = Sales/Total Assets =234‚‚300‚000/130‚338‚900 =1.8 Inventory Turnover = Cost of Goods Sold/Inventory =165‚074‚000/7‚363‚700 =22.41 Receivables Turnover = Sales/Accounts Receivable =234‚300‚000/6‚567‚600 =35.68 Total Debt Ratio = (Total Assets – Total Equity)/Total Assets =(130‚338‚90066‚169‚600)/130‚338‚900 =0.49 DebtEquity Ratio = Total Debt/Total Equity
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8/66.8= 1.09 6.07*100/9.08 DFL (2009) =3.72*100/5.36 = 69.4/81.1 =0.8 5.09*100/6.27 DFL (2008) = 1.43*100/3.93= 36.3/41.92 =0.86 1.85*100/4.413 FINANCIAL RATIOS OF APPLE (2011) PROFIT MARGIN= NET INCOME/SALES =25.92*100/108.6 =23.8% TOTAL ASSET TURNOVER= SALES/TOTAL ASSETS= 108.6/116.37=0.93 FINANCIAL RATIOS (2010)
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Management asks you to prepare a horizontal analysis on the information. 17-9 CLOVER CORPORATION Comparative Balance Sheets December 31‚ 1999 and 1998 1999 1998 Assets Current assets: Cash $ 12‚000 $ 23‚500 Accounts receivable‚ net 60‚000 40‚000 Inventory 80‚000 100‚000 3‚000 1‚200 155‚000 164‚700 40‚000 40‚000 120‚000 85‚000 160‚000 125‚000 Prepaid expenses Total current assets Property and equipment: Land Buildings
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Quick Ratio {(Receivables+Investments+Cash)/Current Liabilities} × 100 2007 2008 2009 Receivables+Investments+Cash 1271295167 1122073235 2451749756 Current Liabilities 1627972936 2602032267 2321451642 Quick Ratio 0.78:1 0.43:1 1.06:1 Table: Quick Ratio 08. Gearing Ratio {Net debt/( Net debt+Equity)} × 100 2007 2008 2009 Net debt 3482784840 Net debt+Equity 13932986985 Gearing Ratio 26.28% 25% 24.12% Table: Gearing Ratio 09. Net asset turnover
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On January 18th 2013‚ Sony announced that it would sell its headquarter building in New York so that its operating profit‚ which was negative in the last year‚ would amount to 685‚000‚000 dollars in the fiscal year ending on March 31st. On August 2013‚ news came out that Sony was officially bankrupt‚ which was later clarified by Sony. Is Sony really undergoing financial difficulties? Structure Introduction Liquidity Financial Analysis Financial Position Solvency Ratio Analysis
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0.75 times Quick ratio = ($11‚270‚000 – 4‚720‚000) / $15‚030‚000 Quick ratio = 0.44 times Total asset turnover = $128‚700‚000 / $83‚550‚000 Total asset turnover = 1.54 times Inventory turnover = $90‚070‚000 / $4‚720‚000 Inventory turnover = 19.22 times Receivables turnover = $128‚700‚000 / $4‚210‚000 Receivables turnover = 30.57 times Total debt ratio = ($83‚550‚000 – 42‚570‚000) / $83‚550‚000 Total debt ratio = 0.49 times
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Team Assignments Team Video Analysis Report In preparation for preparing and submitting the team’s Final Project‚ each week you will create your own consultant’s notes as you observe various CanGo meetings (via the video episodes/cases). For the week 4 Team report you are to list 6 issues facing CanGo that you gleaned from the week 3 and 4 videos. They should be prioritized in order of importance. They should be numbered. The team must then come up with an actionable recommendation for each
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= 1 + debt-equity ratio Times interest earned ratio = EBIT / Interest Cash coverage ratio = (EBIT + depreciation) / interest ♦ Asset Management or Turnover Ratios – Measures how effectively the firm is managing its assets; also called asset utilization ratios. Inventory turnover = cost of goods sold / inventory • It is usually more accurate to use
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per annum better than 2011 which was 19.35%.(normal ratio 6% or more) * The receivable turnover made during the year 2012 is 74 days per annum improved slightly than 2011 which was 75 days. * Accounts payable turnover made during the year 2012 is 9 days per annum better than 2011 which was 81 days. (That means that the company have more liquidity to pay creditors in short time). * Inventory turnover made during the year 2012 is 36 days per annum better than 2011 which was 78 days
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