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Ratio Analysis

How can I explained if I saw this collected data, what does it tells me about the performance and position of Lorette and Alvin's company. See attached file for full problem description.

CURRENT RATIO
Current Ratio =
ACID-TEST RATIO
Acid-Test Ratio =
RECEIVABLES TURNOVER
Receivable Turnover =
INVENTORY TURNOVER
Inventory Turnover =
ASSET TURNOVER
Asset turnover =
PROFIT MARGIN
Profit margin on sales =
RETURN ON ASSETS
Return on assets =
RETURN ON COMMON STOCKHOLDERS' EQUITY
Return on common stockholders' equity =
DEBT TO TOTAL ASSETS
Debt to total assets =
TIMES INTEREST EARNED
Times interest earned =

Attachments

Solution Preview

Liquidity Ratios 2005 2004
Current Ratio 2.09 2.43
Acid test Ratio 0.91 1
Receivables Turnover 8.70
Inventory Turnover 5.4
Profitability Ratios
Profit Margin 3.90%
Return on Assets 5.70%
Return on Equity 8.90%
Solvency Ratios
Debt to Total Assets 36.10%
Times Interest Earned 21.30

If we have to analyze the performance of a firm we would need either two years data or compare with the industry average. In this case we have only one year data and so the analysis would be limited by this.

Liquidity Ratios - The liquidity ratios measure the short term liquidity. The ability of a firm ...

Solution Summary

The solution explains how to evaluate the performance given the liquidity, profitability and solvency ratios

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