Explore BrainMass

Explore BrainMass

    Financial Ratio Calculation

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    See attached file for proper format.

    Industrial Company #1
    (in millions) 2008 2009 2010
    Sales $4,250 $4,500 $4,750
    Operating Income $400 $445 $480
    Net Income $200 $225 $250

    Current Assets $2,500 $2,750 $2,850
    Current Liabilities $2,300 $2,450 $2,500

    Shares Outstanding 100 100 100
    Average Stock Price $32 $39 $50

    Industrial Company #2
    (in millions) 2008 2009 2010
    Sales $3,350 $3,750 $4,250
    Operating Income $335 $395 $470
    Net Income $168 $198 $240

    Current Assets $1,750 $1,900 $2,100
    Current Liabilities $1,350 $1,400 $1,500

    Shares Outstanding 80 80 80
    Av Stock Price $38 $46 $62

    2010 Industry Avg.

    Operating Margin 10.50%
    Net Margin 5.50%
    Current Ratio 1.25
    Earnings/Share $2.75
    PE Ratio 20.0

    I need calculations of the following values for both Industrial Company #1 and Industrial Company #2 using the information from the data tables located above for:

    o Operating income margin
    o Net income margin
    o Current ratio
    o Earnings per share
    o Price-to-earnings (P/E) ratio.
    o Compare the company calculation values to the industry averages.
    o Compare calculations for both Industrial Company #1 and Industrial Company #2

    © BrainMass Inc. brainmass.com June 4, 2020, 2:00 am ad1c9bdddf
    https://brainmass.com/business/price-to-earnings-ratio/financial-ratio-calculation-432513

    Attachments

    Solution Preview

    Please see attached files for ratio calculations.

    I listed the formula at the top of the spreadsheet, then used Excel to calculate them.

    Compare the company calculation values to the industry averages.

    o IC#1
    - Operating margin is below industry average. This suggests inefficiences in the company, as a dollar of sales generates less profit than the industry average.
    - Net margin is below industry average. Similar to Operating margin, it suggests less efficiency in processes (or higher fixed costs)
    - Current ratio is below industry ...

    Solution Summary

    Includes Excel spreadsheet that will calcuate: Operating Margin, Net Margin, Current Ratio, Earnings/Share, and PE Ratio. Formula for each are included for reference. A Word document is also included that compares each ratio in the context of enterprise valuation.

    $2.19

    ADVERTISEMENT