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    Calculating Ratios of Financial Statements of Phone Corp.

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    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.

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    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) / ...