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Calculate 13 financial ratios and 3 market value ratios

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1. Calculating Ratios. Here are simplified financial statements of Phone Corporation from a recent

Net sales 13,193
Cost of goods sold 4,060
Other expenses 4,049
Depreciation 2,518
Earnings before interest and taxes (EBIT) 2,566
Interest expenses 685
Income before tax 1,881
Taxes 570
Net income 1,311
Dividends 856
(Figures in millions of dollars)
End of Year Start of Year

Cash and marketable securities 89 158
Receivables 2,382 2,490
Inventories 187 238
Other current assets 867 932
Total current assets 3,525 3,818
Net property, plant, and equipment 19,973 19,915
Other long-term assets 4,216 3,770
Total assets 27,714 27,503
Liabilities and shareholders' equity:
Payables 2,564 3,040
Short-term debt 1,419 1,573
Other current liabilities 811 787
Total current liabilities 4,794 5,400
Long-term debt and leases 7,018 6,833
Other long-term liabilities 6,178 6,149
Shareholders' equity 9,724 9,121
Total liab.& shareholders' equity 27,714 27,503

1 Calculate the following financial ratios:
a. Long-term debt ratio
b. Total debt ratio
c. Times interest earned
d. Cash coverage ratio
e. Current ratio
f. Quick ratio
g. Operating profit margin
h. Inventory turnover
i. Days in inventory
j. Average collection period
k. Return on equity
l. Return on assets
m. Payout ratio

2. Market Value Ratios. If the market value of Phone Corp. stock was $17.2 billion at the end of
the year, what was the market-to-book ratio? If there were 205 million shares outstanding, what
were earnings per share? The price-earnings ratio?

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Solution Summary

The solution calculates 13 financial ratios and three market value ratios for a phone corporation.

See Also This Related BrainMass Solution

Finance: Ratio analysis

Please show work or calculations if you use a business calculator.

Use the following financial sheets and information for all questions.

The balance sheet and income statement shown below are for Apple Jax Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

Tax rate 40%
Stock price $17.00
Shares outstanding 3,800,000
Dividends are 50% of net income

Income Statement
Period Ending 31-Dec-13
Total Revenue 148,239,000
COGS 118,094,000
Selling General and Administrative 13,384,000
Depreciation 72,000
Earnings Before Interest And Taxes 16,689,000
Interest Expense 829,000
Income Before Tax 15,860,000
Income Tax Expense (40%) 6,344,000

Net Income 9,516,000
Balance Sheet
Date 31-Dec-13
Current Assets
Cash 14,468,000
Net Receivables 98,359,000
Inventory 18,758,000
Total Current Assets 131,585,000

Property Plant and Equipment 70,441,000

Total Assets 202,026,000

Current Liabilities
Accounts Payable 22,446,500
Accruals 14,315,500
Notes Payable 3,631,000
Total Current Liabilities 40,393,000

Long Term Debt 134,919,000

Total Liabilities 175,312,000

Stockholders' Equity
Common Stock 40,000
Retained Earnings 26,674,000

Total Stockholder Equity 26,714,000

Total Assets 202,026,000

Question/Problem 1) (Worth 30 points)
1. What is the firm's current ratio?
2. What is the firm's days-sales-outstanding (DSO)? Assume a 360-day year for this calculation.
3. What is the firm's total assets turnover?
4. What is the firm's inventory turnover ratio?
5. What is the firm's TIE?
6. What is the firm's ROA?
7. What is the firm's basic earning power?
8. What is the firm's ROE?
9. What is the firm's P/E ratio?
10. What is the firm's market-to-book ratio?

Question/Problem 2) (Worth 50 points)
Calculate the additional or external funds needed if the firm is expecting a growth rate of 10% next year. The firm is currently operating at 95% of capacity and the fixed assets can only by $10,000,000 increments.

Question/Problem 3) (Worth 20 points)
Calculate the common size balance sheet and the common size income statement for the company.

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