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Ratio Analysis

P4-15B Selected financial data of two intense competitors in a recent year are presented below in millions of dollars.

Bethlehem Steel Corporation Inland Steel Company

Income Statement Data for Year in millions in millions
Net sales 4,819 4,497
Cost of goods sold 4,548 3,991
Selling and administrative expenses 137 265
Interest expense 46 72
Other income (net) 7 -
Income taxes 14 62

Net income 81 107
Bethlehem Steel Corporation Inland Steel Company

Balance Sheet Data (End-of-Year)
Current assets 1,569 1,081
Property, plant, and equipment (net) 2,759 1,610
Other assets 1,454 662
Total assets 5,782 3,353
Current liabilities 1,011 565
Long-term debt 3,615 2,056
Total stockholders' equity 1,156 732
Total liabilities and stockholders' equity 5,782 3,353
Beginning-of-Year Balances
Total assets 5,877 3,436
Total stockholders' equity 697 623
Other Data
Average net receivables 511 515
Average inventory 868 403
Net cash provided by operating activities 90 160
Average current liabilities 1,210 540
Average total liabilities 4,820 2,595

Instructions
(a) For each company, compute the following ratios.

(1) Current.
(2) Receivables turnover.
(3) Inventory turnover.
(4) Profit margin.
(5) Asset turnover.
(6) Return on assets.
(7) Return on common stockholders' equity.

(8) Debt to total assets.
(9) Times interest earned.
(10) Current cash debt coverage.
(11)Cash return on sales.
(12) Cash debt coverage.
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(b) Compare the liquidity, profitability, and solvency of the two companies.

LIQUIDITY

CURRENT RATIO= BETHLEM INLAND STEEL CO.
CURRENT ASSETS/CURRENT LIABILITIES 1.552 1.913

Accounts receivable turnover.
SALES/AVERAGE RECEIVABLES 9.431 8.732

Inventory turnover.
COST OF GOODS SOLD/AVERAGE ...

Solution Summary

This explains how to analyze the financial performance through ratio analysis.

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