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Calculating Ratios of Financial Statements of Phone Corp.

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

Income Statement
(Figures in millions of dollars)

Net Sales 13,193
Cost of goods sold 4,060
Other Expenses 4,049
Depreciation 2,518
Earings 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 89 159
Receivables 2,382 2,409
Inventories 187 238
Other Current assets 867 932
Total Current Assets 3,525 3,818
Net property, plant, and equipment 1,973 19,915
Other Long-Term assets 4,216 3,770
Total Asstets 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
Long term debt and leases 4,794 5,400
Other long term liabilities 7,018 6,833
Shareholders equity 6,178 6,149
Total Libailiites and shareholders equity9,724 9,121
27,714 27,503

Calculate the following ratios
Long Term debt ratio
Total debt ratio
Times Interest Earned
Cash Coverage ratio
Current Ratio
Quick Ratio
Operating Profit Margin
Inventory Turnover
Days in Inventory
Average Collection Period
Return on Equity
Return on Assets
Payout Ratio

2. Gross Investment - What was Phone Corps gross investment in plant and other equipment?

3. Market Value Ratios - If the market value of Phone Corpo 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?

4. Common Size Balance Sheet - Prepare a common size balance sheet for Phone Corpo using the balance sheet from problem 1.

5. Du Pont Analysis - Use the data for Phone Corpo to confimr that ROA=assetturnover x operating profit margin.

6. Du Pont Analysis - Use the data from Phone Corp problem 1 to calcualte the ROE for Phone Corp

and demonstrate the ROE =leverage ratiox operating profit margin x debt burden.


Solution Preview

Please refer to the attachment.
<br>Calculate the following ratios
<br>Long-term debt ratio = (long-term debt) / (long-term debt + equity) 0.266
<br>Total debt ratio = (total liabilities) / (total assets) 0.777
<br>Times interest earned ratio (interest cover ratio) = (EBIT) / (interest payments) 3.746
<br>Cash coverage ratio = (EBIT + depreciation) / (interest payments) 7.422
<br>Current ratio = (current assets) / (current liabilities) 0.735
<br>Quick ratio = (cash + marketable securities + receivables) / (current liabilities) 0.515
<br>Operating Profit Margin = NI / Sales 0.099
<br>Inventory turnover = (cost of goods sold) / ...