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Financial ratios

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The following information is available from the annual reports of Lucky Company and Broke Company

Lucky Broke

Sales 26,510 34,512
Gross profit 6610 8887
Net Income 565 1271
Current assets 11712 28447
Beginning total assets 17102 33138
Ending total assets 22,080 36167
Current Liabilities 7966 14950
Total Liabilities 16136 31,222
Average common shares outstanding 125 240
Preferred stock dividends paid 0 0

Instructions

(a) For each company, compute the following ratios:
1. Current ratio
2. Debt to total assets ratio
3. Earnings per share

(b) Based on your calculations, discuss the relative liquidity, solvency, and profitability of the two companies.

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Solution Preview

Please see attached file.

(a) For each company, compute the following ratios:

Lucky Broke
1. Current ratio
Current Assets/Current ...

Solution Summary

Response helps in computation of financial ratios

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TREND ANALYSIS

( Liquidity & Asset Utilization Ratios Sears (SHLD) This Year Last Year Walmart (WMT) This Year Last Year

Current Ratio
Current Assets $15,207,000.00 $7,541,000.00 38,491,000.00 34,421,000.00
Current Liabilities $10,350,000.00 1.47 $2,086,000.00 3.62 42,888,000.00 0.90 37,840,000.00 0.91

Quick (Acid-Test) Ratio
Current Assets-Inventory $9,068,000.00 $3,281,000.00 32,191.00 29,762.00
Current Liabilities $10,350,000.00 0.88 $2,086,000.00 1.57 48,826.00 0.66 43,182.00 0.69

Inventory Turnover
Cost of Goods Sold
Average Inventory #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Average Collection Period
Accounts Receivable
Average Daily Sales #DIV/0! #DIV/0! Days #DIV/0! #DIV/0!

Total Asset Turnover
Sales 49,124,000.00 1,106,000.00 285,222,000.00 256,329,000.00
Total Assets 30,573,000.00 1.61 19,701,000.00 0.06 120,223,000.00 2.37 105,405,000.00 2.43

Debt & Interest Coverage Ratios

Debt to Assets Ratio
Total Liabilities
Total Assets #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Debt to Equity Ratio
Total Debt 4,016,000.00 4.00 23,846,000.00 20,006,000.00
Total Equity 11,611,000.00 0.35 367.00 0.01 49,396,000.00 0.48 43,623,000.00 0.46

Interest Coverage Ratio
EBIT(Earnings Before Interest & Taxes) 1,879 875,000 285,222,000.00 256,329,000.00
Interest Expense 237 7.93 108,000 8.10 1,163,000.00 245.25 1,024,000.00 250.32

Profitability Ratios

Gross Margin on Sales
Sales-Cost of Sales
Sales #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Net Profit Margin
Net Profit after taxes 858,000.00 1,106,000.00 10,267,000.00 9,054,000.00
Sales 49,124,000.00 1.7% 19,701,000.00 5.6% 285,222,000.00 3.6% 256,329,000.00 3.5%

Market Based Ratio

Price-Earnings Ratio
Current Market Value of Common Stock 55.15 46.80
Earnings Per Share (EPS) #DIV/0! #DIV/0! 0.62 88.95 0.62 75.48

Addition to list
Return on equity - ROE
Net Income 858,000.00 1,106,000.00 10,267,000.00 9,054,000.00
Share Holders Equity 11,611,000.00 0.07 11,611,000.00 0.10 49,396,000.00 0.21 43,623,000.00 0.21

Return on assets - ROA
Net Income - Interest expense 1,095,000.00 1,214,000.00 11,430,000.00 10,099,000.00
Total assets 30,573,000.00 0.04 8,651,000.00 0.14 120,223,000.00 0.10 105,405,000.00 0.96

PLEASE PERFORM A TREND ANALYSIS ON THE ABOVE FINANCIAL RATIOS, ALSO COMPARE AND CONTRAST THE FINDINGS.
See attached file for full problem description)

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