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Financial Ratios Explained, ROA, ROI

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Hello All OTA's,

How can I get an OTA to help me with this question?
How can I make this question more appealing to answer?

I am writing to ask for major help. I am going through my textbook and completing study questions for a forthcoming exam. One of the questions is rather large, and has taken me a while to compose all of the data, which I have included in the excel spreadsheet.

Just getting the information together was a huge component, but now I am asked to look at the ratios and analyze what the numbers I have generated mean. This is where I am having problems. Verbalizing what the ratio's mean with the numbers I calculated. Rather then ask you to help me with both companies; I am asking that you only help me with one- Fort Garry Brewing Co. (which is an actual beer company).

Please help me in verbalizing in detail what the ratios indicate for Fort Garry in comparison to industry averages (which are included in the link attached. Though the majority on the information is for Brick Brewing Co., there are brewing company industry averages within the column as well. Furthermore, the information appears to be 5 year averages) and in comparison to the Brick.

http://stocks.us.reuters.com/stocks/ratios.asp?WTmodLOC=C3-FindOut-3Ratios

However, once you help me with Fort Garry and explain the ratios I will be able to do the analysis for the brick.

I have attached both the excel sheet which contains the ratios, and the link with the industry ratios .
Thank you so much for your help.

© BrainMass Inc. brainmass.com October 24, 2018, 10:18 pm ad1c9bdddf
https://brainmass.com/business/return-on-assets/155010

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Return on Investment (ROA)- Return on Assets- tells us how profitable the company is relative to its assets and how effiicent management is at using assets to generate earnings. Here, FG has an ROA of -.01 (-.01%) in the most recent ration while the industry standard is 6.03 (6.03%) most recently. This means that FG is not profitable at all since it has a negative net income. Here the expenses exceed the revenue and it is not making money. Even though it used to be profitable in past years (the positive ROA), it was still not earning as much for the assets it has as the industry average for this year. http://www.investopedia.com/terms/r/returnonassets.asp

Return on Equity (ROE)- tells us how how profitable the company is as generated by the money the shareholders have invested. Here, FG is not making any money on the equity invested (0%)(although not really losing money either). The industry average is 34.25 (34.25%). So in this respect, while FG is not really making a profit based on the equity invested, but the industry is making a profit and is thus doing much better. http://www.investopedia.com/terms/r/returnonequity.asp

If you would like help calculating the Return on Equity of common stockholders, here is the formula: return on common equity (ROCE) = net income - preferred dividends / common equity.
- the explanation for this ratio is the same as above

The P/E ratio is the amount of growth projected for the company. In other words, how much an investor is willing to pay per share for a $1 in growth. The higher the ratio, the better the growth potential of the company is projected to be. Here, FG has a P/E ration of 213 which is very high. The industry ratio is 19.18. I would check the FG ratio again to make sure it's correct but if it is, it means that investors are willing to pay $213 for $1 of current earnings on FG stock, but the for the industry the investor is willing to pay a lot less. http://www.investopedia.com/terms/p/price-earningsratio.asp

Price/Free Cash flow ratio- This compares the market price to free cash flow and the higher this measure, the more expensive the company is considered. If a company generates 200 million in operating cash flow and spends $50 million on capital expenditures, it generates cash flow of $150 million. If the company has a market cap of $5 billion, the company trades at 33 times free cash flow ($5 billion/$150 million). Here, FG has a Price/Free Cash flow ratio of -8.05 while the industry average is 35.08. The industry trades at about 35 times free cash flow while FG has a negative ratio which means its cash flow is negative and it does not really have any cash flow. http://www.investopedia.com/terms/p/pricetofreecashflow.asp

Earnings per share- This is an indicator of the company's profitability, the profit allocated for each outstanding share of common ...

$2.19
See Also This Related BrainMass Solution

Summary/Conclusion/Recommendation the Company Financial

See the attached file.

Hershey Liquid 2008:
current ratio = current assets/current liability = 1,344,945 /1270212 = 1.0588
Quick ratio = (Current assets - inventory)/Current liability = (1,344,945 - 592,530)/1270212 = 0.592
Hershey Liquid 2009:
current ratio = current assets/current liability = 1,385,434 / 910,628 = 1.521
Quick ratio = (Current assets - inventory)/Current liability = (1,385,434 - 519,712 )/ 910,628 = 0.951
Tootsie Roll Liquid 2008:
current ratio = current assets/current liability = 187,979 / 59,252 = 3.173
Quick ratio = (Current assets - inventory)/Current liability = (187979 - 55,584) / 59,252 = 2.234
Tootsie Roll Liquid 2009:
current ratio = current assets/current liability = 211878/56066 = 3.779
Quick ratio = (Current assets - inventory)/Current liability = (211878 - 56387)/56066 = 2.773

Hershey Asset Management 2008:
Total Asset Turnover = Sales/Total Asset = 5,132,768 / 3,634,719 = 1.412
Account Receivable Turnover = Credit Sales/Account Receivable = 5,132,768 / 526,056 = 9.757
ACP(Average Collection Period = 365/ Account Receivable Turnover = 365/ 9.757 = 37.4
Hershey Asset Management 2009:
Total Asset Turnover = sales/Total Asset = 5,298,668/3,675,031 = 1.441
Account Receivable Turnover = Credit Sales/Account Receivable = 5,298,668/ 450,258 = 11.768
ACP(Average Collection Period) = 365/ Account Receivable Turnover = 365/ 11.768 = 31.01

Tootsie Roll Asset Management 2008:
Total Asset Turnover = Sales/Total Asset = 496,016 /812,092 = 0.611
Account Receivable Turnover = Credit Sales/Account Receivable = 496,016/34,196 = 14.505
ACP(Average Collection Period = 365/ Account Receivable Turnover = 365/ 14.595 = 25.008
Tootsie Roll asset Management 2009:
Total Asset Turnover = Sales/Total Asset = 499,331/838,247 = 0.596
Account Receivable Turnover = Credit Sales/Account Receivable = 499,331/47276 = 10.562
ACP(Average Collection Period = 365/ Account Receivable Turnover = = 365/ 10.562= 34.557

Hershey debt ratio 2008:
Debt ratio = total debt/total asset = 3,316,520 /3,634,719 = 0.912
Times interest earned = EBIT/ Interest expense = 591700/99,678 = 5.936
Hershey Debt ratio 2009:
Debt Ratio = Total Debt/ Total Asset = 910,628/3,675,031 = 0.248
Times interest earned = EBIT/ Interest expense = 761.6/90.5 = 8.415
Tootsi Roll Debt ratio 2008:
Debt Ratio = Total Debt/ Total Asset = 177,322/812,092 = 0.218
Times interest earned = EBIT/ Interest = 5,6287/378 =148.907
Tootsie Roll Debt ratio 2009:
Debt Ratio = Total Debt/ Total Asset = 183,108 / 838,247 = 0.218
Times interest earned = =EBIT/ Interest = 64,179 / 243 = 264.1

Hershey Profitability 2008:
Net profit Margin = net income /sales = 311,405/5,132,768 = 0.061
Return on assets (ROA) = Net income /total assets = 311,405/3,634,719 = 0.086
Return on equity(ROE) = net income / equity = 311,405/318,199 = 0.979
Extended Du Pont equation
ROI = (net income/sales) * (sales/total assets) = 311,405/ 3,634,719 = 0.086
Return on assets * financial leverage = return on equity
ROE = (net income/total assets) * (total assets/equity) = 311,405/318,199 = 0.979
Hershey Profitability 2009:
Net profit Margin = net income / sales = 435,994/5,298,668 = 0.082
Return on assets (ROA) = Net income / total assets = 435,994/3,675,031 = 0.119
Return on equity (ROE) = net income / equity = 435,994/720,459 = 0.605
Extended Du Pont equation
ROI = (net income/sales) * (sales/total assets) = 435,994/3,675,031 = 0.119
Return on assets * financial leverage = return on equity
ROE = (net income/total assets) * (total assets/equity) = 435,994/720,459 = 0.605

Tootsi Roll Profitability 2008:
Net profit Margin = net income /sales = 38,777/496,016 = 0.078
Return on assets (ROA) = Net income /total assets = 38,777/812,092 = 0.048
Return on equity(ROE) = net income / equity = 38,777/634,770 = 0.061
Extended Du Pont equation
ROI = (net income/sales) * (sales/total assets) = 38,777/812,092 = 0.048
Return on assets * financial leverage = return on equity
ROE = (net income/total assets) * (total assets/equity) = 38,777/634,770 = 0.061
Tootsi Roll Profitability 2009:
Net profit Margin = net income / sales = 53,878/499,331 = 0.108
Return on assets (ROA) = Net income / total assets = 53,878/838247 = 0.064
Return on equity (ROE) = net income / equity = 53,878/655,139 = 0.082
Extended Du Pont equation
ROI = (net income/sales) * (sales/total assets) = 53,878/838247 = 0.064
Return on assets * financial leverage = return on equity
ROE = (net income/total assets) * (total assets/equity) = 53,878/655,139 = 0.082

Hershey Market value ratios 2008
Market Price of common stock at year-end 2008 = 34.74
2008 Earning per share = 1.36
PE(price/earning) = Market price per share/earning per share = 34.74/1.36 = 21.31
Book value per share = stockholder's equity/# of share outstanding = 318,199/227,035 =1.401
Market to book ratio = Market price per share/book value per share = 34.74/1.401= 24.8
Hershey Market value ratios 2009
Market Price of common stock at year-end 2009 = 35.79
2009 Earning per share = 1.90
PE(price/earning) = Market price per share/earning per share = 35.79/1.90 = 18.83
Book value per share = stockholder's equity/# of share outstanding = 720,459/227,998 = 3.156
Market to book ratio = Market price per share/book value per share = 35.79/3.156 = 11.340
Tootsie Roll Market value ratios 2008
Market Price of common stock at year-end 2008 = 24
2008 Earning per share = 0.68
PE(price/earning) = Market price per share/earning per share = 24/0.68 = 35.29
Book value per share = stockholder's equity/# of share outstanding = 634,770/56,799 = 11.17
Market to book ratio = Market price per share/book value per share = 24/11.17 = 2.05
Tootsie Roll Market value ratios 2009
Market Price of common stock at year-end 2009 = 23.5
2009 Earning per share =0 .95
PE(price/earning) = Market price per share/earning per share = 23.5/0.95 = 24.73
Book value per share = stockholder's equity/# of share outstanding = 652485/ 56072 = 11.64
Market to book ratio = Market price per share/book value per share = 23.5/11.64 = 2.02
Summary and Conclusion of Liquidity, Asset Management, Debt Management, Profitability, and Market value ratios. Also recommend which company is better to invest.

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